Optimal Portfolio Projections for Skew-Elliptically Distributed Portfolio Returns

Nicola Loperfido and Tomer Shushi ()
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Tomer Shushi: Ben-Gurion University of the Negev

Journal of Optimization Theory and Applications, 2023, vol. 199, issue 1, No 5, 143-166

Abstract: Abstract We define the concept of optimal portfolio projection, a procedure that projects the vector of weights of the portfolio return to a lower dimension such that one can explicitly solve the problem of optimal portfolio selection for any given risk measure. We study the class of skew-elliptically distributed risks and show that following the proposed procedure, we are able to obtain explicit optimal weights for such risks, with a dramatic reduction of the complexity of such an optimization problem.

Keywords: Modern portfolio theory; Optimal portfolio selection; Projection theory; Risk measures; Risk measurement; Skew-elliptical distributions (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10957-023-02252-x

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