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Efficient skewness/semivariance portfolios

Author

Listed:
  • Rui Pedro Brito

    (University of Coimbra)

  • Hélder Sebastião

    (University of Coimbra)

  • Pedro Godinho

    (University of Coimbra)

Abstract

This article proposes a flexible methodology for portfolio selection using a skewness/semivariance biobjective optimisation framework. The solutions of this biobjective optimisation problem allow the investor to analyse the efficient trade-off between skewness and semivariance. This methodology is used empirically on four data sets, collected from the Fama/French data library. The out-of-sample performance of the skewness/semivariance model was assessed by choosing three portfolios belonging to each in-sample Pareto frontier and measuring their performance in terms of skewness per semivariance ratio, Sharpe ratio and Sortino ratio. Both the in-sample and the out-of-sample performance analyses were conducted using three different target returns for the semivariance computations. The results show that the efficient skewness/semivariance portfolios are consistently competitive when compared with several benchmark portfolios.

Suggested Citation

  • Rui Pedro Brito & Hélder Sebastião & Pedro Godinho, 2016. "Efficient skewness/semivariance portfolios," Journal of Asset Management, Palgrave Macmillan, vol. 17(5), pages 331-346, September.
    • Handle: RePEc:pal:assmgt:v:17:y:2016:i:5:d:10.1057_jam.2016.9
    DOI: 10.1057/jam.2016.9
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    References listed on IDEAS

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    Cited by:

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    2. Heonbae Jeon & Soonbong Lee & Hongseon Kim & Seung Bum Soh & Seongmoon Kim, 2023. "Portfolio Evaluation with the Vector Distance Based on Portfolio Composition," Mathematics, MDPI, vol. 11(1), pages 1-19, January.
    3. C. P. Brás & A. L. Custódio, 2020. "On the use of polynomial models in multiobjective directional direct search," Computational Optimization and Applications, Springer, vol. 77(3), pages 897-918, December.

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