Multivariate location-scale mixtures of normals and mean-variance-skewness portfolio allocation

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[Zeitschriftenartikel]

Mencía, Javier; Sentana, Enrique

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Abstract	We show that the distribution of any portfolio whose components jointly follow a location-scale mixture of normals can be characterised solely by its mean, variance and skewness. Under this distributional assumption, we derive the mean-variance-skewness frontier in closed form, and show that it can be spanned by three funds. For practical purposes, we derive a standardised distribution, provide analytical expressions for the log-likelihood score and explain how to evaluate the information matrix. Finally, we present an empirical application in which we obtain the mean-variance-skewness frontier generated by the ten Datastream US sectoral indices, and conduct spanning tests.
Klassifikation	Wirtschaftsstatistik, Ökonometrie, Wirtschaftsinformatik
Freie Schlagwörter	C52; C32; G11; Generalised hyperbolic distribution; Maximum likelihood; Portfolio frontiers; Sortino ratio; Spanning tests; Tail dependence
Sprache Dokument	Englisch
Publikationsjahr	2009
Seitenangabe	S. 105-121
Zeitschriftentitel	Journal of Econometrics, 153 (2009) 2
DOI	http://dx.doi.org/10.1016/j.jeconom.2009.05.001
Status	Postprint; begutachtet (peer reviewed)
Lizenz	PEER Licence Agreement (applicable only to documents from PEER project)