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Revealed Preferences for Portfolio Selection–Does Skewness Matter?

In this article, we consider the portfolio selection problem as a Bayesian decision problem. We compare the traditional mean–variance and mean–variance–skewness efficient portfolios. We develop bi-level programming problem to investigate the market’s preference for risk by using observed (market) weights. Numerical experiments are conducted on a portfolio formed by the 30 stocks in the Dow Jones Industrial Average. Numerical results show that the market’s preferences are better explained when skewness is included.

Identiferoai:union.ndltd.org:ETSU/oai:dc.etsu.edu:etsu-works-11844
Date16 August 2017
CreatorsLiechty, Merrill W., Sağlam, Ümit
PublisherDigital Commons @ East Tennessee State University
Source SetsEast Tennessee State University
Detected LanguageEnglish
Typetext
SourceETSU Faculty Works

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