The anatomy of portfolio skewness and kurtosis

Hall, AD; Satchell, SE

The anatomy of portfolio skewness and kurtosis

Hall, AD

Satchell, SE

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Publication Type:: Journal Article
Citation:: Journal of Asset Management, 2013, 14 (4), pp. 228 - 235
Issue Date:: 2013-08-01

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Field	Value	Language
dc.contributor.author	Hall, AD https://orcid.org/0000-0002-9724-951X	en_US
dc.contributor.author	Satchell, SE	en_US
dc.date.issued	2013-08-01	en_US
dc.identifier.citation	Journal of Asset Management, 2013, 14 (4), pp. 228 - 235	en_US
dc.identifier.issn	1470-8272	en_US
dc.identifier.uri	http://hdl.handle.net/10453/27944
dc.description.abstract	This article re-examines portfolio higher moments, skewness and kurtosis, to see whether this information can be used to improve portfolio construction and to diagnose any mis-specification of models for portfolio returns. In common with most discussion of quantitative portfolio risk, we assume a linear factor model framework, and some empirical calculations using data from the components of the Dow Jones Industrial Index are carried out. The major insight that we glean from this exercise is that a well-diversified portfolio of skewed stocks can have a symmetric distribution unless we pay some attention to the third moment structure. These ideas are likely to have some potential application to fund of fund construction and the matching of bespoke portfolios to the risk attributes of high-net worth investors. © 2013 Macmillan Publishers Ltd.	en_US
dc.relation.ispartof	Journal of Asset Management	en_US
dc.relation.isbasedon	10.1057/jam.2013.18	en_US
dc.title	The anatomy of portfolio skewness and kurtosis	en_US
dc.type	Journal Article
utslib.citation.volume	4	en_US
utslib.citation.volume	14	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access
pubs.issue	4	en_US
pubs.publication-status	Published	en_US
pubs.volume	14	en_US

Abstract:

This article re-examines portfolio higher moments, skewness and kurtosis, to see whether this information can be used to improve portfolio construction and to diagnose any mis-specification of models for portfolio returns. In common with most discussion of quantitative portfolio risk, we assume a linear factor model framework, and some empirical calculations using data from the components of the Dow Jones Industrial Index are carried out. The major insight that we glean from this exercise is that a well-diversified portfolio of skewed stocks can have a symmetric distribution unless we pay some attention to the third moment structure. These ideas are likely to have some potential application to fund of fund construction and the matching of bespoke portfolios to the risk attributes of high-net worth investors. © 2013 Macmillan Publishers Ltd.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/27944