Portfolio Selection with Skewness: A Comparison of Methods and Generalized Two Fund Separition Result

Walter Briec (briec@univ-perp.fr), Kristiaan Kerstens and Ignace Van de Woestyne (ignace.vandewoestyne@hubrussel.be)
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Walter Briec: Universit ?e de Perpignan, Perpignan, France
Ignace Van de Woestyne: Hogeschool-Universiteit Brussel

No 1103, Working Papers from Departament Empresa, Universitat Autònoma de Barcelona

Abstract: 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. Inspired by these illustrations, we prove a generalization of the well-known two fund separation theorem from traditional mean-variance portfolio theory.

Keywords: shortage function; PGP; efficient frontier; mean-variance; mean-variance-skewness (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2011-09, Revised 2011-09
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Published in Working Papers at the Department of Business, Octuber pages 1-49

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Persistent link: https://EconPapers.repec.org/RePEc:bbe:wpaper:1103

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