Dissertation/Thesis Abstract

Portfolio Optimization under Generalized Hyperbolic Distribution of Returns and Exponential Utility
by Chavez-Bedoya Mercado, Luis Carlos, Ph.D., Northwestern University, 2011, 187; 3488449
Abstract (Summary)

We thoroughly analyze the asset allocation problem under exponential utility and generalized hyperbolic (GH) distribution of returns. We provide expressions to compute the optimal portfolio weights, as well as a formula to compute the optimal portfolio when the feasible set is a linear combination of pre-existing portfolios. We also dene more general measures of risk and return that allow the construction of an “efficient frontier” and are useful to assess the performance of investment alternatives and portfolio rules. Additionally, we relate our results with shrinkage estimators and three-fund rules, in the sense that they can be used to mitigate the eect of considering an elliptical distribution of returns when the true distribution is non-elliptical. Finally, we present an application to active portfolio management, and numerical results that assess the performance of several mean-variance portfolio rules under a particular case of GH distribution.

Indexing (document details)
Advisor: Birge, John R.
Commitee: Hazen, Gordon B., Staum, Jeremy C.
School: Northwestern University
Department: Industrial Engineering and Management Sciences
School Location: United States -- Illinois
Source: DAI-A 73/04, Dissertation Abstracts International
Subjects: Finance
Keywords: Asset allocation, Generalized hyperbolic distribution, Portfolio optimization, Portfolio performance
Publication Number: 3488449
ISBN: 978-1-267-08442-2
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