Abstract
We discuss the question of portfolio selection when the returns of the assets under consideration are characterized by a heavy-tailed distribution. As distributional assumption we consider the sub-Gaussian stable model and address the problems of estimation and portfolio optimization. The advantages for risk assessment when relaxing the normal assumption in favor of the heavy-tailed variant are illustrated empirically.
Research support by the Deutsche Forschungsgemeinschaft is greatfully acknowledged.
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Doganoglu, T., Mittnik, S., Rachev, S. (2002). Portfolio Selection in the Presence of Heavy-Tailed Asset Returns. In: Klein, I., Mittnik, S. (eds) Contributions to Modern Econometrics. Dynamic Modeling and Econometrics in Economics and Finance, vol 4. Springer, Boston, MA. https://doi.org/10.1007/978-1-4757-3602-1_5
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DOI: https://doi.org/10.1007/978-1-4757-3602-1_5
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