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A unified view on the optimal solutions to the threemoments portfolio problem

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  • Athayde, Gustavo M. de
  • Flôres Junior, Renato Galvão
Abstract
This paper brings new results and deeper insights in characterizing the set of solutions to the portfolio selection problem for n risky assets and a riskless one, considering the three first moments and allowing short sales. We examine the three versions associated with this model and find a synthetic equation valid for all of them. With the help of the duality condition linking the optimization problems involved, we are able to introduce the idea of the fundamental equation. This unifying approach sheds light on the understanding of a global efficient frontier in the three-moments model and opens the door to further developments.

Suggested Citation

  • Athayde, Gustavo M. de & Flôres Junior, Renato Galvão, 2022. "A unified view on the optimal solutions to the threemoments portfolio problem," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 829, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:829
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    References listed on IDEAS

    as
    1. Bertrand Maillet & Emmanuel Jurczenko, 2006. "Multi-moment Asset Allocation and Pricing Models," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00308990, HAL.
    2. Bertrand Maillet & Emmanuel Jurczenko, 2006. "Multi-moment Asset Allocation and Pricing Models," Post-Print hal-00308990, HAL.
    3. Kraus, Alan & Litzenberger, Robert H, 1976. "Skewness Preference and the Valuation of Risk Assets," Journal of Finance, American Finance Association, vol. 31(4), pages 1085-1100, September.
    Full references (including those not matched with items on IDEAS)

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