Revealed Preferences for Portfolio Selection - Does Skewness Matter?
| Autor: | Merrill W. Liechty, Ümit Sağlam |
|---|---|
| Rok vydání: | 2016 |
| Předmět: |
Economics and Econometrics
050208 finance 05 social sciences Bayesian probability Variance (accounting) Decision problem 01 natural sciences Bilevel optimization Preference Microeconomics 010104 statistics & probability Skewness 0502 economics and business Econometrics Economics Portfolio 0101 mathematics Portfolio optimization Preference (economics) Selection (genetic algorithm) Mathematics |
| Zdroj: | SSRN Electronic Journal. |
| ISSN: | 1556-5068 |
| DOI: | 10.2139/ssrn.2817057 |
| Popis: | In this study, we consider two competing methods, traditional mean/variance efficient portfolio and a generalization allowing for skewness as a Bayesian decision problem. Using observed (market) weights we investigate the market’s preference for risk. We do this with bilevel optimization, where the first level maximizes the investor’s objective (utility) function and the second level minimizes the discrepancy between the market and the optimal portfolio weights. This reveals the market’s preference for risk by estimating the implied market utility. Numerical results show that the market’s preferences are better explained when skewness is included. |
| Databáze: | OpenAIRE |
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