Mean–variance–skewness efficient surfaces, Stein’s lemma and the multivariate extended skew-Student distribution
Recent advances in Stein’s lemma imply that under elliptically symmetric distributions all rational investors will select a portfolio which lies on Markowitz’ mean–variance efficient frontier. This paper describes extensions to Stein’s lemma for the case when a random vector has the multivariate extended skew-Student distribution. Under this distribution, rational investors will select a portfolio which lies on a single mean–variance–skewness efficient hyper-surface. The same hyper-surface arises under a broad class of models in which returns are defined by the convolution of a multivariate elliptically symmetric distribution and a multivariate distribution of non-negative random variables. Efficient portfolios on the efficient surface may be computed using quadratic programming.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 234 (2014)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/eor|
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.:
- Reinaldo B. Arellano-Valle & Adelchi Azzalini, 2006. "On the Unification of Families of Skew-normal Distributions," Scandinavian Journal of Statistics, Danish Society for Theoretical Statistics;Finnish Statistical Society;Norwegian Statistical Association;Swedish Statistical Association, vol. 33(3), pages 561-574.
- Walter Briec & Kristiaan Kerstens & Octave Jokung, 2007.
"Mean-Variance-Skewness Portfolio Performance Gauging: A General Shortage Function and Dual Approach,"
INFORMS, vol. 53(1), pages 135-149, January.
- K. Kerstens, 2005. "Mean-Variance Skewness Portfolio Performance Gauging:A General Shortage Function and Dual Approach," Post-Print hal-00288765, HAL.
- Walter Briec & Kristiaan Kerstens & Octave Jokung, 2005. "Mean-Variance-Skewness Portfolio Performance Gauging: A General Shortage Function and Dual Approach," Working Papers 2005-ECO-05, IESEG School of Management.
- W. Briec & K. Kerstens & O. Jokung, 2007. "Mean-variance-skewness portfolio performance gauging: A general shortage function and dual approach," Post-Print hal-00211572, HAL.
- Landsman, Zinoviy, 2006. "On the generalization of Stein's Lemma for elliptical class of distributions," Statistics & Probability Letters, Elsevier, vol. 76(10), pages 1012-1016, May.
- A. Azzalini & A. Capitanio, 1999. "Statistical applications of the multivariate skew normal distribution," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 61(3), pages 579-602.
- Campbell Harvey & John Liechty & Merrill Liechty & Peter Muller, 2010. "Portfolio selection with higher moments," Quantitative Finance, Taylor & Francis Journals, vol. 10(5), pages 469-485.
- Adelchi Azzalini & Marc G. Genton, 2008. "Robust Likelihood Methods Based on the Skew-"t" and Related Distributions," International Statistical Review, International Statistical Institute, vol. 76(1), pages 106-129, 04.
- Paul A. Samuelson, 1970. "The Fundamental Approximation Theorem of Portfolio Analysis in terms of Means, Variances and Higher Moments," Review of Economic Studies, Oxford University Press, vol. 37(4), pages 537-542.
- C. Adcock, 2010. "Asset pricing and portfolio selection based on the multivariate extended skew-Student-t distribution," Annals of Operations Research, Springer, vol. 176(1), pages 221-234, April.
- Liu, Jun S., 1994. "Siegel's formula via Stein's identities," Statistics & Probability Letters, Elsevier, vol. 21(3), pages 247-251, October.
- Horrace, William C., 2005. "Some results on the multivariate truncated normal distribution," Journal of Multivariate Analysis, Elsevier, vol. 94(1), pages 209-221, May.
- Yusif Simaan, 1993. "Portfolio Selection and Asset Pricing---Three-Parameter Framework," Management Science, INFORMS, vol. 39(5), pages 568-577, May.
- Li, Xiang & Qin, Zhongfeng & Kar, Samarjit, 2010. "Mean-variance-skewness model for portfolio selection with fuzzy returns," European Journal of Operational Research, Elsevier, vol. 202(1), pages 239-247, April.
- Matmoura, Yassine & Penev, Spiridon, 2013. "Multistage optimization of option portfolio using higher order coherent risk measures," European Journal of Operational Research, Elsevier, vol. 227(1), pages 190-198.
- de Athayde, Gustavo M. & Flores, Renato Jr., 2004. "Finding a maximum skewness portfolio--a general solution to three-moments portfolio choice," Journal of Economic Dynamics and Control, Elsevier, vol. 28(7), pages 1335-1352, April.
- Kraus, Alan & Litzenberger, Robert H, 1976. "Skewness Preference and the Valuation of Risk Assets," Journal of Finance, American Finance Association, vol. 31(4), pages 1085-1100, September.
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
- Jondeau, E. & Rockinger, M., 2004.
"Optimal Portfolio Allocation Under Higher Moments,"
108, Banque de France.
- Goh, Joel Weiqiang & Lim, Kian Guan & Sim, Melvyn & Zhang, Weina, 2012. "Portfolio value-at-risk optimization for asymmetrically distributed asset returns," European Journal of Operational Research, Elsevier, vol. 221(2), pages 397-406.
- Adelchi Azzalini & Antonella Capitanio, 2003. "Distributions generated by perturbation of symmetry with emphasis on a multivariate skew "t"-distribution," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 65(2), pages 367-389.
- J. G. Kallberg & W. T. Ziemba, 1983. "Comparison of Alternative Utility Functions in Portfolio Selection Problems," Management Science, INFORMS, vol. 29(11), pages 1257-1276, November.
- Sun, Qian & Yan, Yuxing, 2003. "Skewness persistence with optimal portfolio selection," Journal of Banking & Finance, Elsevier, vol. 27(6), pages 1111-1121, June.
- Branco, Márcia D. & Dey, Dipak K., 2001. "A General Class of Multivariate Skew-Elliptical Distributions," Journal of Multivariate Analysis, Elsevier, vol. 79(1), pages 99-113, October.
- Kim, Hyoung-Moon & Genton, Marc G., 2011. "Characteristic functions of scale mixtures of multivariate skew-normal distributions," Journal of Multivariate Analysis, Elsevier, vol. 102(7), pages 1105-1117, August.
- Reinaldo B. Arellano-Valle & Marc G. Genton, 2010. "Multivariate extended skew-t distributions and related families," Metron - International Journal of Statistics, Dipartimento di Statistica, Probabilità e Statistiche Applicate - University of Rome, vol. 0(3), pages 201-234.
- Landsman, Zinoviy & Neslehová, Johanna, 2008. "Stein's Lemma for elliptical random vectors," Journal of Multivariate Analysis, Elsevier, vol. 99(5), pages 912-927, May.
- Arditti, Fred D & Levy, Haim, 1975. "Portfolio Efficiency Analysis in Three Moments: The Multiperiod Case," Journal of Finance, American Finance Association, vol. 30(3), pages 797-809, June.
When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:234:y:2014:i:2:p:392-401. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.