Realised Higher Moments: Theory and Practice
University of Wales, Swansea - School of Business and Economics
Julian M. Williams
University of Aberdeen Business School
July 23, 2012
This paper examines incorporation of higher moments in portfolio selection problems utilizing high frequency data. Our approach combines innovations from the realized volatility literature with a portfolio selection methodology utilising higher moments. We provide an empirical study of the measurement of higher moments from tick by tick data and implement the model for a selection of stocks from the DOW 30 over the time period 2005 to 2011. We demonstrate a novel estimator for moments and co-moments in the presence of microstructure noise.
Number of Pages in PDF File: 33
Keywords: Higher Moments, Asset Allocation, Portfolio Management, Co-movement
JEL Classification: G14, G15, G17working papers series
Date posted: July 31, 2012
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