Multiperiod portfolio selection with higher-order moment

Subject Areas : Financial engineering

reza tehrani ¹ (Professor, Tehran university,faculty of management, finance department)
saeed Fallahpour ² (Assistant Professor, Tehran university, faculty of management, finance department)
Mohammad reza Rostami ³ (Assistant Professor, Alzahra university, social science faculty, management department -)
mehdi biglari kami ⁴ (Corresponding Author's Institution: Tehran university, finance department)

Received: 2018-03-12 Accepted : 2018-03-27 Published : 2018-12-22

Keywords: Optimization, Portfolio Selection, Skewness, Sharp ratio,

Abstract :

risk & return are two main factors that affect financial decisions. The trade off between risk & return create different investment strategies. In other words investment decisions are all based on risk & return. In this research we used multiperiod selection method in order to maximize investors utility. In this model we used not only variance but also higher order moment –skewness- for optimization. For emprical test of the model we used return of first 50 companies stored by market capitalization in tehran stock exchange during 1386-1395. We used skewness & transaction cost to introduce a moltipriod model in asset allocation to minimize variance of investors utility. Comparing the result of this model with markowitz model & simpel model considering investor preferences shows that based on performance evaluation criteria, the suggested model perform much better than the two other.