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Efficient portfolios computed with moment-based bounds

Author

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  • Morton, David P.
  • Dokov, Steftcho
  • Popova, Ivilina

Abstract

Using Bernstein polynomials, we derive moment-based bounding approximations on the expected value of a utility function. We show that optimizing these bounds yields a solution, which is mean–variance (MV) or MV-skewness–kurtosis (MVSK) efficient depending on how many moments are included in the approximation. Practitioners actively managing portfolios may find the approximations useful in their pursuit of designing new trading strategies via asset allocation models based on different utility functions.

Suggested Citation

  • Morton, David P. & Dokov, Steftcho & Popova, Ivilina, 2023. "Efficient portfolios computed with moment-based bounds," Finance Research Letters, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322006018
    DOI: 10.1016/j.frl.2022.103424
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    References listed on IDEAS

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