Template-Type: ReDIF-Paper 1.0
Author-Name: Trino-Manuel Niguez
Author-Name-First: Trino-Manuel
Author-Name-Last: Niguez
Author-Name: Ivan Paya
Author-Name-First: Ivan
Author-Name-Last: Paya
Author-Name: David Peel
Author-Name-First: David
Author-Name-Last: Peel
Author-Name: Javier Perote
Author-Name-First: Javier
Author-Name-Last: Perote
Title: Higher-order moments in the theory of diversification and portfolio composition
Abstract: This paper revisits the corner solution in classical portfolio choice theory in which risk-averse agents would all be optimally plungers rather than diversifiers. We examine the effect of higher-order moments of two-, three- and four-parameter density functions on the investor's decision to diversify in an expected utility framework. The empirical analysis provides estimates of four parametric and two semi-nonparametric densities for the S&P500 and concluded that allocation of all wealth in the risky asset would not have been optimal.
Creation-Date: 2013
File-URL: http://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/economics/working-papers/Paya_2013_3.pdf
File-Format: application/pdf
Number: 18297128
Classification-JEL: 
Keywords: 
Handle: RePEc:lan:wpaper:18297128