Nonparametric portfolio efficiency measurement with higher moments
The paper considers a nonparametric approach to determine portfolio efficiency using specific directions toward the portfolio frontier function. This approach allows for a straightforward incorporation of higher moments of the returns distribution beyond mean and variance. The nonparametric approach...
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| Veröffentlicht in: | Empirical economics 2021-09, Vol.61 (3), p.1435-1459 |
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| container_title | Empirical economics |
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| creator | Krüger, Jens J |
| description | The paper considers a nonparametric approach to determine portfolio efficiency using specific directions toward the portfolio frontier function. This approach allows for a straightforward incorporation of higher moments of the returns distribution beyond mean and variance. The nonparametric approach is extended by the computation of optimal directions endogenously by maximizing the distance toward the portfolio frontier as a novel methodological feature. An empirical application to Fama–French portfolios demonstrates the applicability of the nonparametric approach. The results show that the optimal directions to the frontier depend on the portfolio considered as well as on the period for which the moments are estimated. Skewness in particular plays a role in determining the optimal direction, whereas kurtosis seems to be less crucial. |
| doi_str_mv | 10.1007/s00181-020-01917-0 |
| format | Article |
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| ispartof | Empirical economics, 2021-09, Vol.61 (3), p.1435-1459 |
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| source | Business Source Complete; Springer Nature - Complete Springer Journals |
| subjects | Approximation Data envelopment analysis Directional distance functions Econometrics Economic theory Economic Theory/Quantitative Economics/Mathematical Methods Economics Economics and Finance Efficiency Expected utility Finance Insurance Kurtosis Linear programming Management Measurement Nonparametric statistics Portfolio choice Portfolio performance Portfolios Risk aversion Skewness Skewness and kurtosis Statistics for Business Stocks Utility functions |
| title | Nonparametric portfolio efficiency measurement with higher moments |
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