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Algorithmic Portfolio Tilting to Harvest Higher Moment Gains

Boudt, Kris - 2020

Many financial portfolios are optimized without taking the higher moments into account. We recommend tilting these portfolios in a direction that increases their estimated mean and third central moment and decreases their variance and fourth central moment. The advantages of tilting come at the...

Persistent link: https://www.econbiz.de/10012849428

Investments as Probability Distributions

Jacobsen, Brian - 2010

The core of the theory behind portfolio construction was developed in 1956 by Harry Markowitz. Many pages have been … theory. I cannot recommend enough the insights provided in Modern Portfolio Theory and Investment Analysis, 8/e, by Edwin … the original integrity behind Markowitz's insights and addresses many of the criticisms of the theory …

Persistent link: https://www.econbiz.de/10013147812

Modeling Extreme Events : Time-Varying Extreme Tail Shape

Schwaab, Bernd; Lucas, Andre; Zhang, Xin - 2021

Generalized Pareto Distribution (GPD) for modeling peaks over thresholds as in Extreme Value Theory, but casts the model in a …

Persistent link: https://www.econbiz.de/10013243812

Tail Risk in Credit Markets : A Dynamic Power-Law Model

Fellmann, Reinhard - 2021

I provide a measure of time-varying tail risk in credit markets based on a dynamic power-law model. Credit tail risk is estimated from extreme price fluctuations of credit default swaps (CDS) on government debt. Tail returns are described by a power-law for core and peripheral countries within...

Persistent link: https://www.econbiz.de/10013244546

Modeling extreme events: time-varying extreme tail shape

Schwaab, Bernd; Zhang, Xin; Lucas, André - 2020

Generalized Pareto Distribution (GPD) for modeling peaks over thresholds as in Extreme Value Theory, but casts the model in a …

Persistent link: https://www.econbiz.de/10012385032

Financial frictions and the wealth distribution

Fernández-Villaverde, Jesús; Hurtado, Samuel; Nuño, Galo - 2020

We postulate a nonlinear DSGE model with a financial sector and heterogeneous households. In our model, the interaction between the supply of bonds by the financial sector and the precautionary demand for bonds by households produces significant endogenous aggregate risk. This risk induces an...

Persistent link: https://www.econbiz.de/10012260513

Skewness and kurtosis ratio tests : with applications to multiperiod tail risk analysis

Wong, Woon K. - 2016

This article extends the variance ratio test of Lo and MacKinlay (1988) to tests of skewness and kurtosis ratios. The proposed tests are based on generalized methods of moments. In particular, overlapping observations are used and their dependencies (under the IID assumption) are explicitly...

Persistent link: https://www.econbiz.de/10011688190

Pricing climate change risks : CAPM with rare disasters and stochastic probabilities

Karydas, Christos; Xepapadeas, Anastasios - 2019

these events. Using theory and simulations we study the implications of the imminent threat of climate change on different …

Persistent link: https://www.econbiz.de/10011962146

A non-elliptical orthogonal GARCH model for portfolio selection under transaction costs

Paolella, Marc S.; Polak, Pawel; Walker, Patrick S. - 2019

Covariance matrix forecasts for portfolio optimization have to balance sensitivity to new data points with stability in order to avoid excessive rebalancing. To achieve this, a new robust orthogonal GARCH model for a multivariate set of non-Gaussian asset returns is proposed. The conditional...

Persistent link: https://www.econbiz.de/10012134234

Accurate evaluation of expected shortfall for linear portfolios with elliptically distributed risk factors

Dobrev, Dobrislav; Nesmith, Travis D.; Oh, Dong Hwan - In: Journal of risk and financial management : JRFM 10 (2017) 1, pp. 1-14

We provide an accurate closed-form expression for the expected shortfall of linear portfolios with elliptically distributed risk factors. Our results aim to correct inaccuracies that originate in Kamdem (2005) and are present also in at least thirty other papers referencing it, including the...

Persistent link: https://www.econbiz.de/10011619035