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https://hdl.handle.net/10316/45744
Título: | Portfolio management with higher moments: the cardinality impact | Autor: | Brito, Rui Pedro Sebastião, Hélder Godinho, Pedro |
Palavras-chave: | portfolio management; cardinality; expected utility maximization; CRRA preferences; derivative-free optimization; PSI20 index | Data: | 17-Mar-2017 | Editora: | Wiley | Título da revista, periódico, livro ou evento: | International Transactions in Operational Research | Resumo: | This paper extends the study of the cardinality impact on portfolio performance, from the traditional mean-variance framework to more general frameworks that include higher moments. For each framework, we propose a biobjective model that allows the investor to explicitly analyze the efficient trade-off between expected utility and cardinality. We applied the proposed methodology to data from the Portuguese Stock Index (PSI20 index). The empirical results show that, in-sample, the certainty equivalent and the Sharpe ratio increase with the cardinality level in all frameworks. The results also suggest that there are no performance gains, in-sample, in terms of certainty equivalent, when higher moments are considered. Out of sample, the turnover increases up to a certain cardinality level, then decreases. For certain cardinality levels, there are gains in terms of out-of-sample certainty equivalent and Sharpe ratio, when skewness and kurtosis are considered. Finally, we check the robustness of these results in a large dataset from the EUROSTOXX50 index. | URI: | https://hdl.handle.net/10316/45744 | ISSN: | 0969-6016 | DOI: | 10.1111/itor.12404. | Direitos: | embargoedAccess |
Aparece nas coleções: | I&D CeBER - Artigos em Revistas Internacionais |
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