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Higher-order moments in the theory of diversification and portfolio composition

Niguez, Trino-Manuel and Paya, Ivan and Peel, David and Perote, Javier (2013) Higher-order moments in the theory of diversification and portfolio composition. Working Paper. The Department of Economics. (Unpublished)

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    Abstract

    This paper revisits the corner solution in classical portfolio choice theory in which risk-averse agents would all be optimally plungers rather than diversifiers. We examine the effect of higher-order moments of two-, three- and four-parameter density functions on the investor's decision to diversify in an expected utility framework. The empirical analysis provides estimates of four parametric and two semi-nonparametric densities for the S&P500 and concluded that allocation of all wealth in the risky asset would not have been optimal.

    Item Type: Monograph (Working Paper)
    Subjects: H Social Sciences > HB Economic Theory
    Departments: Lancaster University Management School > Economics
    ID Code: 57981
    Deposited By: ep_importer_pure
    Deposited On: 30 Aug 2012 10:01
    Refereed?: No
    Published?: Unpublished
    Last Modified: 10 Apr 2014 02:43
    Identification Number:
    URI: http://eprints.lancs.ac.uk/id/eprint/57981

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