Static and Dynamic Asset Allocation with Higher Moments

14 Pages Posted: 5 Jan 2007

See all articles by Julian M. Williams

Julian M. Williams

Durham Business School

Christos Ioannidis

University of Bath-Department of Economics

Date Written: 2006

Abstract

This paper illustrates a semi-parametric approach to static and dynamic asset allocation problems in terms of the moments of a multivariate distribution. By use of a general class of H-distributions, we reconstruct the portfolio density function from the moment sequence derived from the multivariate co-moments of its components. The information provided by these high order dependencies is used to capture tail dependency, diversification risk and asymmetries. The authors feel that the techniques suggested in this article offer a very useful set of tools for modern finance.

Keywords: Higher Moments, Asset Allocation, Portfolio Selection, Utility Theory

JEL Classification: G11, G12, G13, C32

Suggested Citation

Williams, Julian M. and Ioannidis, Christos, Static and Dynamic Asset Allocation with Higher Moments (2006). Available at SSRN: https://ssrn.com/abstract=954995 or http://dx.doi.org/10.2139/ssrn.954995

Julian M. Williams (Contact Author)

Durham Business School ( email )

Mill Hill Lane
Durham, Durham DH1 3LB
United Kingdom

Christos Ioannidis

University of Bath-Department of Economics ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

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