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  • Pure_FRL_NPP

    Rights statement: This is the author’s version of a work that was accepted for publication in Finance Research Letters. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Finance Research Letters, 19, 2016 DOI: 10.1016/j.frl.2016.08.010

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Pure higher-order effects in the portfolio choice model

Research output: Contribution to Journal/MagazineJournal articlepeer-review

Published
<mark>Journal publication date</mark>11/2016
<mark>Journal</mark>Finance Research Letters
Volume19
Number of pages6
Pages (from-to)255-260
Publication StatusPublished
Early online date11/08/16
<mark>Original language</mark>English

Abstract

This paper examines the effects of higher-order risk attitudes and statistical moments on the optimal allocation of risky assets within the standard portfolio choice model. We derive the expressions for the optimal proportion of wealth invested in the risky asset to show they are functions of portfolio returns third- and fourth-order moments as well as on the investor's risk preferences of prudence and temperance. We illustrate the relative importance that the introduction of those higher-order effcts have in the decision of expected utility maximizers using data for the US.

Bibliographic note

This is the author’s version of a work that was accepted for publication in Finance Research Letters. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Finance Research Letters, 19, 2016 DOI: 10.1016/j.frl.2016.08.010