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. Lancaster University, Department of Economics, Lancaster.

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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)
Uncontrolled Keywords:
/dk/atira/pure/researchoutput/libraryofcongress/hb
Subjects:
ID Code:
57981
Deposited By:
Deposited On:
30 Aug 2012 09:01
Refereed?:
No
Published?:
Published
Last Modified:
01 Dec 2020 10:35