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Construction of portfolios considering higuer moments for investment funds

Authors

Genjis A. Ossa Gonzalez Universidad Popular del Cesar (Colombia) https://orcid.org/0000-0002-8194-0859
Miriam Rojas Domínguez Universidad Popular del César (Colombia) https://orcid.org/0000-0002-5839-0086

DOI:

https://doi.org/10.26360/2024_01

Keywords:

Return, Asymmetry, Kurtosis, Portfolio optimization

Abstract

The objective of this study is to build a portfolio using Higher Moments and considering ETF-type assets. A quantitative methodology is used that is not only based on the normality of the expected utility, but also on the inclusion of higher moments. The ultimate goal is to optimize the utility of each portfolio and determine the top three. When analyzing the returns of the portfolio made up of the LABU, PSQ, FXI, SPY and IWM assets, a decrease in returns was observed both in absolute and percentage terms when considering higher moments. Under normal conditions, most assets posted negative returns, and this trend intensified when including higher moments. Regarding the portfolios, it was found that Portfolio 2 showed an outstanding performance in terms of utility under the assumption of normality. Despite having significantly higher kurtosis than the other portfolios, this portfolio exhibited a higher positive mean and lower volatility. However, when considering the higher moments equation, it was revealed that none of the portfolios was viable as an investment option, indicating a higher risk in all of them.

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Published

2024-07-31

Versions

2024-12-12 (2)
2024-07-31 (1)

How to Cite

Ossa Gonzalez, G. A., & Rojas Domínguez, M. (2024). Construction of portfolios considering higuer moments for investment funds. Anales Del Instituto De Actuarios Españoles, (30), e01. https://doi.org/10.26360/2024_01