Quantifying the non-Gaussian gain

Allen, D; Satchell, S; Lizieri, C

Quantifying the non-Gaussian gain

Allen, D Satchell, S Lizieri, C

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Publisher:: Springer Nature
Publication Type:: Journal Article
Citation:: Journal of Asset Management, 2024, 25, (1), pp. 1-18
Issue Date:: 2024-02

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Field	Value	Language
dc.contributor.author	Allen, D
dc.contributor.author	Satchell, S
dc.contributor.author	Lizieri, C
dc.date.accessioned	2024-03-11T01:44:33Z
dc.date.available	2024-03-11T01:44:33Z
dc.date.issued	2024-02
dc.identifier.citation	Journal of Asset Management, 2024, 25, (1), pp. 1-18
dc.identifier.issn	1470-8272
dc.identifier.issn	1479-179X
dc.identifier.uri	http://hdl.handle.net/10453/176436
dc.description.abstract	<jats:title>Abstract</jats:title><jats:p>In this paper, we quantify the economic gain from accounting for departures from normality for the mean-variance (MV) investor. We provide two models that account for the key empirical regularities of financial returns: stochastic volatility, asymmetric returns, heavy tails and tail dependence. We show that accounting for departures from normality leads to significant gains in expected utility commensurate with or exceeding typical active management fees. The majority of the uplift in expected utility derives from accounting for stochastic volatility.</jats:p>
dc.language	en
dc.publisher	Springer Nature
dc.relation.ispartof	Journal of Asset Management
dc.relation.isbasedon	10.1057/s41260-023-00338-9
dc.rights	info:eu-repo/semantics/openAccess
dc.subject	1502 Banking, Finance and Investment
dc.subject.classification	3502 Banking, finance and investment
dc.subject.classification	3801 Applied economics
dc.title	Quantifying the non-Gaussian gain
dc.type	Journal Article
utslib.citation.volume	25
utslib.for	1502 Banking, Finance and Investment
pubs.organisational-group	University of Technology Sydney
pubs.organisational-group	University of Technology Sydney/Faculty of Business
pubs.organisational-group	University of Technology Sydney/Faculty of Business/Finance Discipline
utslib.copyright.status	open_access	*
dc.date.updated	2024-03-11T01:44:32Z
pubs.issue	1
pubs.publication-status	Published
pubs.volume	25
utslib.citation.issue	1

Abstract:

AbstractIn this paper, we quantify the economic gain from accounting for departures from normality for the mean-variance (MV) investor. We provide two models that account for the key empirical regularities of financial returns: stochastic volatility, asymmetric returns, heavy tails and tail dependence. We show that accounting for departures from normality leads to significant gains in expected utility commensurate with or exceeding typical active management fees. The majority of the uplift in expected utility derives from accounting for stochastic volatility.

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http://hdl.handle.net/10453/176436