Artikel

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 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.

Language
Englisch

Bibliographic citation
Journal: Empirical Economics ; ISSN: 1435-8921 ; Volume: 61 ; Year: 2020 ; Issue: 3 ; Pages: 1435-1459 ; Berlin, Heidelberg: Springer

Classification
Wirtschaft
Portfolio Choice; Investment Decisions
Semiparametric and Nonparametric Methods: General
Subject
Finance
Portfolio choice
Directional distance functions
Skewness and kurtosis

Event
Geistige Schöpfung
(who)
Krüger, Jens J.
Event
Veröffentlichung
(who)
Springer
(where)
Berlin, Heidelberg
(when)
2020

DOI
doi:10.1007/s00181-020-01917-0
Last update
10.03.2025, 11:42 AM CET

Data provider

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Object type

  • Artikel

Associated

  • Krüger, Jens J.
  • Springer

Time of origin

  • 2020

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