Technical Report: Portfolio selection with skewness in emerging markets. Part 1: Industries
نویسندگان
چکیده
In the presence of skewness, portfolio selection requires to consider competing and conflicting objectives. We utilize polynomial goal programming to determine the optimal portfolio from emerging markets industries. The first part of this paper is concerned with an industry level analysis of the effects of portfolio selection when the skewness is taken into account. The second part of the paper is devoted to the same analysis but at a country level. In the second part we also evaluate the portfolio selection with both industries and countries together with the aim to contribute to the diversification debate. We find that the incorporation of skewness into an investor’s portfolio decision provokes a great change in the resultant optimal portfolio allocation. This evidence suggests that individuals trade expected return for skewness. JEL classification: G11, G15
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