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Efficient Frontier for Robust Higher-order Moment Portfolio Selection

Author

Listed:
  • Emmanuel Jurczenko

    (ESCP-EAP - ESCP-EAP)

  • Bertrand Maillet

    (A.A.Advisors-QCG - ABN AMRO, EIF - Europlace Institute of Finance, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Paul Merlin

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, A.A.Advisors - ABN AMRO)

Abstract

This article proposes a non-parametric portfolio selection criterion for the static asset allocation problem in a robust higher-moment framework. Adopting the Shortage Function approach, we generalize the multi-objective optimization technique in a four-dimensional space using L-moments, and focus on various illustrations of a four-dimensional set of the first four L-moment primal efficient portfolios. our empirical findings, using a large European stock database, mainly rediscover the earlier works by Jean (1973) and Ingersoll (1975), regarding the shape of the extended higher-order moment efficient frontier, and confirm the seminal prediction by Levy and Markowitz (1979) about the accuracy of the mean-variance criterion.

Suggested Citation

  • Emmanuel Jurczenko & Bertrand Maillet & Paul Merlin, 2008. "Efficient Frontier for Robust Higher-order Moment Portfolio Selection," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00336475, HAL.
    • Handle: RePEc:hal:cesptp:halshs-00336475
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00336475
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    Cited by:

    1. Briec, Walter & Kerstens, Kristiaan, 2010. "Portfolio selection in multidimensional general and partial moment space," Journal of Economic Dynamics and Control, Elsevier, vol. 34(4), pages 636-656, April.

    More about this item

    Keywords

    Efficient frontier; portfolio selection; robust higher L-moments; shortage function; goal attainment application.; goal attainment application; Frontière efficiente; sélection de portefeuille; moment d'ordre supérieur robuste; L-moment; fonction de pénurie.;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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