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.
| Identifer | oai:union.ndltd.org:ETSU/oai:dc.etsu.edu:etsu-works-11844 |
| Date | 16 August 2017 |
| Creators | Liechty, Merrill W., Sağlam, Ümit |
| Publisher | Digital Commons @ East Tennessee State University |
| Source Sets | East Tennessee State University |
| Detected Language | English |
| Type | text |
| Source | ETSU Faculty Works |
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