How skewness influences optimal allocation in a risky asset? created by M. Eling , K. K. Sudheesh and L. Tibiletti

By:

Eling, M [author]

Contributor(s):

Material type: Text

TextSeries: Applied economics letters ; Volume 20, number 9New York: Taylor and Francis, 2013Content type:

text

Media type:

unmediated

Carrier type:

volume

ISSN:

13504851

Subject(s):

Skew normal distribution -- Optimal asset allocation -- Stein's Lemma

LOC classification:

HB1.A666 APP

Online resources:

Click here to access online

Abstract: This article extends the classic Samuelson (1970) and Merton (1973) model of optimal portfolio allocation with one risky asset and a riskless one to include the effect of the skewness. Using an extended version of Stein's Lemma, we provide the explicit solution for optimal demand that holds for all expected utility maximizing investors when the risky asset is skew-normally and normally distributed. A closed expression is achieved for investors with constant absolute risk aversion.

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Item type	Current library	Call number	Vol info	Copy number	Status	Notes	Date due	Barcode
Journal Article	Main Library - Special Collections	HB1.A666 APP (Browse shelf(Opens below))	Vol. 20, no. 9 (pages 842-846)	SP17975	Not for loan	For In House Use Only

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This article extends the classic Samuelson (1970) and Merton (1973) model of optimal portfolio allocation with one risky asset and a riskless one to include the effect of the skewness. Using an extended version of Stein's Lemma, we provide the explicit solution for optimal demand that holds for all expected utility maximizing investors when the risky asset is skew-normally and normally distributed. A closed expression is achieved for investors with constant absolute risk aversion.

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