IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Portfolio Selection with Skewness: A Comparison of Methods and a Generalized One Fund Result

  • Walter Briec

    (Université de Perpignant)

  • Kristiaan Kerstens


    (CNRS-LEM and IESEG School of Management)

  • Ignace Van de Woestyne

    (Hogeschool Universiteit Brussel)

This contribution compares 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 in relation to the goal programming literature in operations research. Inspired by these illustrations, we prove two new results: a formal relation between both approaches and a generalization of the well-known one fund separation theorem from traditional mean-variance portfolio theory.

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.

File URL:
Our checks indicate that this address may not be valid because: 503 Service Unavailable. If this is indeed the case, please notify (Monika Marin)

Download Restriction: no

Paper provided by IESEG School of Management in its series Working Papers with number 2013-ECO-04.

in new window

Length: 13 pages
Date of creation: Apr 2013
Date of revision:
Handle: RePEc:ies:wpaper:e201304
Contact details of provider: Postal: 3, rue de la Digue, FR-59000 Lille
Phone: +33/320545892
Fax: +33/320574855
Web page:

More information through EDIRC

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.:

as in new window
  1. Reinhold Hafner & Martin Wallmeier, 2008. "Optimal investments in volatility," Financial Markets and Portfolio Management, Springer, vol. 22(2), pages 147-167, June.
  2. Jondeau, E. & Rockinger, M., 2004. "Optimal Portfolio Allocation Under Higher Moments," Working papers 108, Banque de France.
  3. Balbás, Alejandro & Balbás, Beatriz & Balbás, Raquel, 2010. "CAPM and APT-like models with risk measures," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1166-1174, June.
  4. Hsin-Hung Chen, 2008. "Value-at-Risk Efficient Portfolio Selection Using Goal Programming," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 11(02), pages 187-200.
  5. Kristiaan Kerstens & Amine Mounir & Amine Mounir & Ignace Van de Woestyne, 2008. "Geometric Representation of the Mean-Variance-Skewness Portfolio Frontier Based upon the Shortage Function," Working Papers 2008-ECO-17, IESEG School of Management.
  6. Canela, Miguel Angel & Collazo, Eduardo Pedreira, 2007. "Portfolio selection with skewness in emerging market industries," Emerging Markets Review, Elsevier, vol. 8(3), pages 230-250, September.
  7. Gregoriou, Greg N. & Sedzro, Komlan & Zhu, Joe, 2005. "Hedge fund performance appraisal using data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 164(2), pages 555-571, July.
  8. K. Kerstens, 2005. "Mean-Variance Skewness Portfolio Performance Gauging:A General Shortage Function and Dual Approach," Post-Print hal-00288765, HAL.
  9. Leung, Mark T. & Daouk, Hazem & Chen, An-Sing, 2001. "Using investment portfolio return to combine forecasts: A multiobjective approach," European Journal of Operational Research, Elsevier, vol. 134(1), pages 84-102, October.
  10. Brodie, Joshua & Daubechies, Ingrid & De Mol, Christine & Giannone, Domenico, 2007. "Sparse and Stable Markowitz Portfolios," CEPR Discussion Papers 6474, C.E.P.R. Discussion Papers.
  11. Joro, Tarja & Na, Paul, 2006. "Portfolio performance evaluation in a mean-variance-skewness framework," European Journal of Operational Research, Elsevier, vol. 175(1), pages 446-461, November.
  12. Walter Briec & Kristiaan Kerstens, 2009. "Portfolio Selection in Multidimensional General and Partial Moment Space," Working Papers 2009-ECO-08, IESEG School of Management.
  13. 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.
  14. Sun, Qian & Yan, Yuxing, 2003. "Skewness persistence with optimal portfolio selection," Journal of Banking & Finance, Elsevier, vol. 27(6), pages 1111-1121, June.
  15. 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.
  16. 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.
  17. 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.
  18. Lozano, Sebastián & Gutiérrez, Ester, 2008. "Data envelopment analysis of mutual funds based on second-order stochastic dominance," European Journal of Operational Research, Elsevier, vol. 189(1), pages 230-244, August.
  19. Chun-Hao Chang & Brice DuPoyet & Arun Prakash, 2008. "Optimum allocation of weights to assets in a portfolio: the case of nominal annualization versus effective annualization of returns," Applied Financial Economics, Taylor & Francis Journals, vol. 18(20), pages 1635-1646.
  20. Diana Roman & Kenneth Darby-Dowman & Gautam Mitra, 2007. "Mean-risk models using two risk measures: a multi-objective approach," Quantitative Finance, Taylor & Francis Journals, vol. 7(4), pages 443-458.
  21. 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.
  22. 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.
  23. Muller, Sigrid M. & Machina, Mark J., 1987. "Moment preferences and polynomial utility," Economics Letters, Elsevier, vol. 23(4), pages 349-353.
  24. Victor DeMiguel & Lorenzo Garlappi & Raman Uppal, 2009. "Optimal Versus Naive Diversification: How Inefficient is the 1-N Portfolio Strategy?," Review of Financial Studies, Society for Financial Studies, vol. 22(5), pages 1915-1953, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ies:wpaper:e201304. 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: (Monika Marin)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.