Tag Archives: kurtosis
The portfolio optimization higher-moment credo
The question of skewness and kurtosis in portfolio optimization. Previously Problem 4 of “The top 7 portfolio optimization problems” concerns the use of higher moments. “Further adventures with higher moments” is the most recent in a series of posts on the efficacy of higher moments in optimization. This set includes the observation that “trade selection” … Continue reading
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Tagged kurtosis, portfolio optimisation, portfolio optimization, skewness, trade selection
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Further adventures with higher moments
Additional views of the stability of skewness and kurtosis of equity portfolios. Previously A post called “Four moments of portfolios” introduced the idea of looking at the stability of the mean, variance, skewness and kurtosis of portfolios through time. That post gave birth to a presentation at the London Quant Group. That talk gave birth … Continue reading
The efficacy of higher moments in portfolio optimization
On Monday I gave a talk at the London Quant Group entitled “Exploring the efficacy of higher moments in portfolio optimisation”. A substantial number of people showed up, and they taught me quite a lot about the subject. So it seems to have been successful. There are now annotated slides available. The slides point towards … Continue reading
Posted in Quant finance
Tagged kurtosis, portfolio optimisation, portfolio optimization, skewness
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Four moments of portfolios
What good are the skewness and kurtosis of portfolios? Previously The post “Cross-sectional skewness and kurtosis: stocks and portfolios” looked at skewness and kurtosis in portfolios. The key difference between that post and this one is what distribution is being looked at. The previous post specified a single time and looked at the distribution across … Continue reading
garch and long tails
How much does garch shorten long tails? Previously Pertinent blog posts include: “A practical introduction to garch modeling” “The distribution of financial returns made simple” “Predictability of kurtosis and skewness in S&P constituents” Induced tails Part of the reason that the distributions of returns have long tails is because of volatility clustering. It’s not really … Continue reading
Cross-sectional skewness and kurtosis: stocks and portfolios
Not quite expected behavior of skewness and kurtosis. The question In each time period the returns of a universe of stocks will have some distribution — distributions as displayed in “Replacing market indices” and Figure 1. Figure 1: A cross-sectional distribution of simple returns of stocks. In particular they will have values for skewness and … Continue reading
A slice of S&P 500 kurtosis history
How fat tailed are returns, and how does it change over time? Previously The sister post of this one is “A slice of S&P 500 skewness history”. Orientation The word “kurtosis” is a bit weird. The original idea was of peakedness — how peaked is the distribution at the center. That’s what we can see, … Continue reading
Predictability of kurtosis and skewness in S&P constituents
How much predictability is there for these higher moments? Data The data consist of daily returns from the start of 2007 through mid 2011 for almost all of the S&P 500 constituents. Estimates were made over each half year of data. Hence there are 8 pairs of estimates where one estimate immediately follows the other. … Continue reading
