Multivariate Location-Scale Mixtures of Normals and Mean-Variance-Skewness Portfolio Allocation
Copyright policy )Multivariate Location-Scale Mixtures of Normals and Mean-Variance-Skewness Portfolio Allocation
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.
- Economic Policy Institute United States
- Centro de Estudios Monetarios y Financieros Spain
- Bank of Spain Spain
- CEMFI Spain
Applications of statistics to actuarial sciences and financial mathematics, spanning tests, Economics, tail dependence, Generalised hyperbolic distribution, maximum likelihood, portfolio frontiers, spanning tests, tail dependence., Generalised hyperbolic distribution, Portfolio theory, C52, Tail dependence, Generalised Hyperbolic Distribution, Maximum Likelihood, Portfolio Frontiers, Sortino Ratio, Spanning Tests, Tail Dependence, generalised hyperbolic distribution, G11, maximum likelihood, C52; C32; G11; Generalised hyperbolic distribution; Maximum likelihood; Portfolio frontiers; Sortino ratio; Spanning tests; Tail dependence, C32, Economic Statistics, Econometrics, Business Informatics, portfolio frontiers, Wirtschaft, Portfolio frontiers, Wirtschaftsstatistik, Ökonometrie, Wirtschaftsinformatik, Spanning tests, Sortino ratio, Maximum likelihood, ddc: ddc:330, jel: jel:C52, jel: jel:C32, jel: jel:G11
Applications of statistics to actuarial sciences and financial mathematics, spanning tests, Economics, tail dependence, Generalised hyperbolic distribution, maximum likelihood, portfolio frontiers, spanning tests, tail dependence., Generalised hyperbolic distribution, Portfolio theory, C52, Tail dependence, Generalised Hyperbolic Distribution, Maximum Likelihood, Portfolio Frontiers, Sortino Ratio, Spanning Tests, Tail Dependence, generalised hyperbolic distribution, G11, maximum likelihood, C52; C32; G11; Generalised hyperbolic distribution; Maximum likelihood; Portfolio frontiers; Sortino ratio; Spanning tests; Tail dependence, C32, Economic Statistics, Econometrics, Business Informatics, portfolio frontiers, Wirtschaft, Portfolio frontiers, Wirtschaftsstatistik, Ökonometrie, Wirtschaftsinformatik, Spanning tests, Sortino ratio, Maximum likelihood, ddc: ddc:330, jel: jel:C52, jel: jel:C32, jel: jel:G11
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