13 Dec

Exploring the efficacy of higher moments in portfolio optimisation

avocado-on-white-1152191-m(The avocado talk)

Main points:

  • Neither word in “portfolio optimization” is very good — a much better phrase is “trade selection”
  • An experiment hints at the usefulness of skewness and kurtosis for equities
  • The number of parameters explodes for skewness and kurtosis for large asset universes
  • Factor models and shrinkage are two possible ways of modeling skewness and kurtosis
  • There is a lot that we don’t know


annotated slides (pdf)

Presented 2013 December 9 at the London Quant Group.

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