Do investors dislike kurtosis?
We show that decreasing absolute prudence implies kurtosis aversion. The ``proof''' of this relation is usually based on the identification of kurtosis with the fourth centered moment of the return distribution and a Taylor approximation of the utility function. A more sound analysis is required, however, as such heuristic arguments have been shown to be logically flawed.
Volume (Year): 7 (2007)
Issue (Month): 2 ()
|Contact details of provider:|| |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bawa, Vijay S., 1975. "Optimal rules for ordering uncertain prospects," Journal of Financial Economics, Elsevier, vol. 2(1), pages 95-121, March.
- Michael W. Brandt & Amit Goyal & Pedro Santa-Clara & Jonathan R. Stroud, 2005.
"A Simulation Approach to Dynamic Portfolio Choice with an Application to Learning About Return Predictability,"
Review of Financial Studies,
Society for Financial Studies, vol. 18(3), pages 831-873.
- Michael W. Brandt & Amit Goyal & Pedro Santa-Clara & Jonathan Storud, 2004. "A Simulation Approach to Dynamic Portfolio Choice with an Application to Learning About Return Predictability," NBER Working Papers 10934, National Bureau of Economic Research, Inc.
- Bertrand Maillet & Emmanuel Jurczenko, 2006. "Multi-moment Asset Allocation and Pricing Models," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00308990, HAL.
- Haim Levy, 1992. "Stochastic Dominance and Expected Utility: Survey and Analysis," Management Science, INFORMS, vol. 38(4), pages 555-593, April.
- Eric Jondeau & Michael Rockinger, 2006. "Optimal Portfolio Allocation under Higher Moments," European Financial Management, European Financial Management Association, vol. 12(1), pages 29-55.
- Jondeau, E. & Rockinger, M., 2004. "Optimal Portfolio Allocation Under Higher Moments," Working papers 108, Banque de France.
- Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
- Jean, William H, 1980. " The Geometric Mean and Stochastic Dominance," Journal of Finance, American Finance Association, vol. 35(1), pages 151-158, March.
- Benoit Mandelbrot, 2015. "The Variation of Certain Speculative Prices," World Scientific Book Chapters,in: THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 3, pages 39-78 World Scientific Publishing Co. Pte. Ltd..
- Benoit Mandelbrot, 1963. "The Variation of Certain Speculative Prices," The Journal of Business, University of Chicago Press, vol. 36, pages 394-394.
- Vinod, H. D., 2004. "Ranking mutual funds using unconventional utility theory and stochastic dominance," Journal of Empirical Finance, Elsevier, vol. 11(3), pages 353-377, June.
- Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March.
- Massimo Guidolin & Allan Timmerman, 2005. "Optimal portfolio choice under regime switching, skew and kurtosis preferences," Working Papers 2005-006, Federal Reserve Bank of St. Louis.
- Robert F. Dittmar, 2002. "Nonlinear Pricing Kernels, Kurtosis Preference, and Evidence from the Cross Section of Equity Returns," Journal of Finance, American Finance Association, vol. 57(1), pages 369-403, 02. Full references (including those not matched with items on IDEAS)