Title: Risk-Loving and Risk-Averse Preferences in Portfolio Modelling: A Common Characterization using a Shortage Function
Authors: Briec, Walter
Kerstens, Kristiaan
Van de Woestyne, Ignace
Issue Date: 2013
Conference: Financial Modelling Post-2008: Where Next? Seminar 2: Distributional Assumptions and Efficiency location:St Andrews (United Kingdom) date:21-22 March 2013
Abstract: This paper develops a nonparametric efficiency measurement approach for the static portfolio selection problem in mean-variance-skewness-kurtosis space. A shortage function is defined that can characterize both mixed risk-loving and mixed risk-aversion preferences: it can either look for possible increases in all four moments, or look for increases in uneven moments and decreases in even moments. We also establish appropriate duality relations with four moment investor utility functions. This framework is illustrated with two-dimensional and three-dimensional geometric reconstructions of the optimal portfolio frontiers. Furthermore, we try to characterize the optimal portfolios corresponding to the risk-loving and risk-averse preferences.
Publication status: published
KU Leuven publication type: IMa
Appears in Collections:Faculty of Economics and Business (FEB) - miscellaneous
Research Centre for Mathematical Economics, Econometrics and Statistics, Campus Brussels (-)

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