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Portfolio Selection with Skewness: A Comparison of Methods and Generalized Two Fund Separition Result

Author

Listed:
  • Walter Briec

    (Universit ?e de Perpignan, Perpignan, France)

  • Kristiaan Kerstens

    (IESEG School of Management)

  • Ignace Van de Woestyne

    (Hogeschool-Universiteit Brussel)

Abstract

This contribution compares existing and newly developed techniques for geometrically representing mean-variance-skewness portfolio frontiers based on the rather widely adapted methodology of polynomial goal programming (PGP) on the one hand and the more recent approach based on the shortage function on the other hand. Moreover, we explain the working of these different methodologies in detail and provide graphical illustrations. Inspired by these illustrations, we prove a generalization of the well-known two fund separation theorem from traditional mean-variance portfolio theory.

Suggested Citation

  • Walter Briec & Kristiaan Kerstens & Ignace Van de Woestyne, 2011. "Portfolio Selection with Skewness: A Comparison of Methods and Generalized Two Fund Separition Result," Working Papers 1103, Departament Empresa, Universitat Autònoma de Barcelona, revised Sep 2011.
    • Handle: RePEc:bbe:wpaper:1103
    as

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    More about this item

    Keywords

    shortage function; PGP; efficient frontier; mean-variance; mean-variance-skewness;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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