How Higher Moments affect the allocation of assets

Details

Serval ID
serval:BIB_F00F853898DE
Type
Article: article from journal or magazin.
Collection
Publications
Institution
Title
How Higher Moments affect the allocation of assets
Journal
Finance Letters
Author(s)
Rockinger M., Jondeau E.
ISSN
1740-6242
Publication state
Published
Issued date
2003
Peer-reviewed
Oui
Volume
1
Number
2
Pages
1-5
Language
english
Abstract
We evaluate how deviations from normality may affect the allocation of assets. A Taylor expansion of expected utility allows us to focus on certain moments and to compute numerically the optimal portfolio allocation. We obtain that for small values of the risk-aversion parameter, non-normality does not alter significantly the optimal allocation. In contrast, when the investor is strongly risk averse, and restricted to invest in risky assets only, we also obtain significant changes in portfolio weights.
Keywords
Asset allocation, Stock returns, Non-normality, Utility function
Create date
25/05/2009 14:12
Last modification date
20/08/2019 17:17
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