Portfolio Selection with Skewness

Phelim Boyle and Brian Ding

Chapter Chapter 11 in Numerical Methods in Finance, 2005, pp 227-240 from Springer

Abstract: Abstract Konno et al. (1993) proposed a method for incorporating skewness into the portfolio optimization problem. This paper extends their technique and proposes a modification which leads to portfolios with improved characteristics. The model is then used to analyze the potential for put options to increase the skewness of portfolios. This strategy is tested with historical returns on a portfolio of TSE stocks. Compared to the Konno et al. (1993) approach our resulting portfolio has higher skewness and lower variance; with expected return being equal.

Keywords: Optimal Portfolio; Portfolio Selection; Hedge Fund; Prospect Theory; Portfolio Optimization Problem (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-0-387-25118-9_11

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DOI: 10.1007/0-387-25118-9_11

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