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Algorithmic portfolio tilting to harvest higher moment gains

Authors
  • Boudt, Kris
  • Cornilly, Dries
  • Van Holle, Frederiek
  • Willems, Joeri
Publication Date
Jan 01, 2020
Identifiers
DOI: 10.1016/j.heliyon.2020.e03516
OAI: oai:archive.ugent.be:8659453
Source
Ghent University Institutional Archive
Keywords
Language
English
License
Green
External links

Abstract

Many financial portfolios are not mean-variance-skewness-kurtosis efficient. 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 cost of deviation from the initial optimality criterion. In this paper, we show the usefulness of portfolio tilting applied to the equally-weighted, equal-risk-contribution and maximum diversification portfolios in a UCITS-compliant asset allocation setting.

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