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Portfolio Selection in Multidimensional General and Partial Moment Space

Author

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  • Walter Briec

    (University of Perpignan, GEREM)

  • Kristiaan Kerstens

    (CNRS-LEM (UMR 8179), IESEG School of Management)

Abstract

This paper develops a general approach for the single period portfolio optimization problem in a multidimensional general and partial moment space. A shortage function is defined that looks for possible increases in odd moments and decreases in even moments. A main result is that this shortage function ensures suffcient conditions for global optimality. It also forms a natural basis for developing tests on the infuence of additional moments. Furthermore, a link is made with an approximation of an arbitrary order of a general indirectutility function. This nonparametric effciency measurement framework permits to dfferentiate mainly between portfolio effciency and allocative effciency. Finally, information can,in principle, be inferred about the revealed risk aversion, prudence, temperance and otherhigher-order risk characteristics of investors.

Suggested Citation

  • Walter Briec & Kristiaan Kerstens, 2009. "Portfolio Selection in Multidimensional General and Partial Moment Space," Working Papers 2009-ECO-08, IESEG School of Management.
    • Handle: RePEc:ies:wpaper:e200908
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    More about this item

    Keywords

    shortage function; efficient frontier; K-moment portfolios;
    All these keywords.

    JEL classification:

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

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