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Empirical Economics

Erschienen in:

01.08.2015

Asset allocation under higher moments with the GARCH filter

verfasst von: Ryo Kinoshita

Erschienen in: Empirical Economics | Ausgabe 1/2015

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Abstract

Except for several pairs of utility functions and distribution functions, expected utility maximization problems do not have closed-form solutions so that these problems often require complex numerical optimizations. The paper proposes an approximated solution to this problem using higher moments of returns. Utility functions are approximated by polynomials by the Taylor expansion, and thus, expected utility functions are approximated by linear combinations of moments. With the GARCH effects, a simple approach to estimate conditional higher moments is given. In an empirical study, the strategy is compared to alternative strategies such as mean variance optimization and static optimization.

Vorheriger Artikel Financial liberalization and patterns of international portfolio holdings

Nächster Artikel Financial markets and the response of monetary policy to uncertainty in South Africa

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Titel: Asset allocation under higher moments with the GARCH filter
verfasst von: Ryo Kinoshita
Publikationsdatum: 01.08.2015
Verlag: Springer Berlin Heidelberg
Erschienen in: Empirical Economics / Ausgabe 1/2015
Print ISSN: 0377-7332
Elektronische ISSN: 1435-8921
DOI: https://doi.org/10.1007/s00181-014-0871-1

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