Efficient Frontier for Robust Higher-Order Moment Portfolio Selection
Posted: 25 Oct 2008 Last revised: 3 Mar 2019
Date Written: October 24, 2008
This article proposes a non-parametric portfolio selection criterion for the static asset allocation problem in a robust higher-moment framework. Adopting the Shortage Function approach, we generalize the multi-objective optimization technique in a four-dimensional space using L-moments, and focus on various illustrations of a four-dimensional set of the first four L-moment primal efficient portfolios. Our empirical findings, using a large European stock database, mainly rediscover the earlier works by Jean (1973) and Ingersoll (1975), regarding the shape of the extended higher-order moment efficient frontier, and confirm the seminal prediction by Levy and Markowitz (1979) about the accuracy of the mean-variance criterion.
Keywords: Efficient Frontier, Portfolio Selection, Robust Higher L-moments, Shortage Function, Goal Attainment Application
JEL Classification: G14, C45, G110, G120
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