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Portfolio Selection with Skewness: A Comparison and a Generalized Two Fund Separation Result

  • Briec, Walter

    ()

    (Universit´e de Perpignan, Perpignan, France)

  • Kerstens, Kristiaan

    ()

    (IESEG School of Management, Lille, France)

  • Van de Woestyne, Ignace

    ()

    (Hogeschool-Universiteit Brussel (HUB), Belgium)

The main aim of this contribution is to compare 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.

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File URL: https://lirias.hubrussel.be/bitstream/123456789/4819/1/11HRP09.pdf
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Paper provided by Hogeschool-Universiteit Brussel, Faculteit Economie en Management in its series Working Papers with number 2011/09.

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Length: 34 page
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:hub:wpecon:201109
Contact details of provider: Web page: http://research.hubrussel.be

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  1. Brodie, Joshua & Daubechies, Ingrid & De Mol, Christine & Giannone, Domenico & Loris, Ignace, 2008. "Sparse and stable Markowitz portfolios," Working Paper Series 0936, European Central Bank.
  2. 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.
  3. Kerstens, Kristiaan & Mounier, Amine & Van de Woestyne, Ignace, 2008. "Geometric representation of the mean-variance-skewness portfolio frontier based upon the shortage function," Working Papers 2008/61, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
  4. Chunhachinda, Pornchai & Dandapani, Krishnan & Hamid, Shahid & Prakash, Arun J., 1997. "Portfolio selection and skewness: Evidence from international stock markets," Journal of Banking & Finance, Elsevier, vol. 21(2), pages 143-167, February.
  5. 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.
  6. Shady Aboul-Enein & Georges Dionne & Nicolas Papageorgiou, 2009. "Performance Analysis of a Collateralized Fund Obligation (CFO) Equity Tranche," Cahiers de recherche 0931, CIRPEE.
  7. Prakash, Arun J. & Chang, Chun-Hao & Pactwa, Therese E., 2003. "Selecting a portfolio with skewness: Recent evidence from US, European, and Latin American equity markets," Journal of Banking & Finance, Elsevier, vol. 27(7), pages 1375-1390, July.
  8. repec:bbe:wpaper:200203 is not listed on IDEAS
  9. Chun-Hao Chang & Brice Dupoyet & Arun Prakash, 2008. "Effect of intervalling and skewness on portfolio selection in developed and developing markets," Applied Financial Economics, Taylor & Francis Journals, vol. 18(21), pages 1697-1707.
  10. Walter Briec & Kristiaan Kerstens & Jean Baptiste Lesourd, 2001. "Single Period Markowitz Portfolio Selection, Performance Gading and Duality: A Variation on Luenberger'a Shortage Function," Working Papers 0203, Departament Empresa, Universitat Autònoma de Barcelona, revised Apr 2002.
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