Pure higher-order effects in the portfolio choice model
Niguez, Trino-Manuel and Paya, Ivan and Peel, David Alan
(2016)
Pure higher-order effects in the portfolio choice model.
Finance Research Letters, 19.
pp. 255-260.
ISSN 1544-6123
![[thumbnail of Pure_FRL_NPP]](https://eprints.lancs.ac.uk/80941/1.hassmallThumbnailVersion/Pure_FRL_NPP.pdf)
Preview
PDF (Pure_FRL_NPP)
Pure_FRL_NPP.pdf
- Accepted Version
Available under License Creative Commons Attribution-NonCommercial-NoDerivs.
Download (151kB)
Abstract
This paper examines the effects of higher-order risk attitudes and statistical moments on the optimal allocation of risky assets within the standard portfolio choice model. We derive the expressions for the optimal proportion of wealth invested in the risky asset to show they are functions of portfolio returns third- and fourth-order moments as well as on the investor's risk preferences of prudence and temperance. We illustrate the relative importance that the introduction of those higher-order effcts have in the decision of expected utility maximizers using data for the US.
Item Type:
Journal Article
Journal or Publication Title:
Finance Research Letters
Additional Information:
This is the author’s version of a work that was accepted for publication in Finance Research Letters. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Finance Research Letters, 19, 2016 DOI: 10.1016/j.frl.2016.08.010
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2000/2003
Subjects:
?? higher-order momentsportfolio choiceprudencetaylor approximationtemperancefinance ??
Deposited On:
25 Aug 2016 10:16
Last Modified:
11 Apr 2025 01:42