Mean-Variance-Skewness Portfolio Performance Gauging: A General Shortage Function and Dual Approach

This paper proposes a nonparametric efficiency measurement approach for the static portfolio selection problem in mean-variance-skewness space.

Author(s) :

Walter Briec

Maître de conférences, University of Perpignan

Kristiaan Kersten

Chargé de recherche, CNRS-LABORES, IESEG

Octave Jokung

Professor, EDHEC Business School

A shortage function is defined that looks for possible increases in return and skewness and decreases in variance. Global optimality is guaranteed for the resulting optimal portfolios. We also establish a link to a proper indirect mean-variance-skewness utility function. For computational reasons, the optimal portfolios resulting from this dual approach are only locally optimal. This framework makes it possible to differentiate between portfolio efficiency and allocative efficiency, and a convexity efficiency component related to the difference between the primal, non-convex approach and the dual, convex approach. Furthermore, in principle, information can be retrieved about the revealed risk aversion and prudence of investors. An empirical section on a small sample of assets serves as an illustration.
Pdf
Mean-Variance-Skewness Portfolio Performance Gauging: A General Shortage Functio...
(-1.00 B)
Type : Working paper
Date : le 05/09/2005
Extra information : Pour plus d'informations, nous vous prions de vous adresser à Joanne Finlay, Direction de la recherche de l'EDHEC [ joanne.finlay@edhec.edu ] Les opinions exprimées sont celles des auteurs et n'engagent pas la responsabilité de l'EDHEC.
Research Cluster : Finance

See Also

Assets replicating Scientific Beta’s multi-factor indices reach USD 25bn
News
- 22-02-2018
Scientific Beta, the smart beta index provider offshoot of EDHEC-Risk Institute, has...
EDHEC Named France National Champions of the KPMG International Case Competition
News
- 20-02-2018
Impact Consulting, a team of four, EDHEC M1 Business Management students, are national...
Investing in Relationships: Why trust matters in private banking
News
- 19-02-2018
  The presentation, The Private Banking Industry – Current Mapping and Future...
EDHEC Global MBA OPEN DAY
News
- 16-02-2018
Looking to advance your career ?  Join the Global MBA team for an exclusive OPEN...