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Do investors dislike kurtosis?

Author

Listed:
  • Markus Haas

    (University of Munich)

Abstract

We show that decreasing absolute prudence implies kurtosis aversion. The ``proof''' of this relation is usually based on the identification of kurtosis with the fourth centered moment of the return distribution and a Taylor approximation of the utility function. A more sound analysis is required, however, as such heuristic arguments have been shown to be logically flawed.

Suggested Citation

  • Markus Haas, 2007. "Do investors dislike kurtosis?," Economics Bulletin, AccessEcon, vol. 7(2), pages 1-9.
    • Handle: RePEc:ebl:ecbull:eb-06g00072
    as

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    References listed on IDEAS

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    Cited by:

    1. Gulder Kemalbay & C. Murat Ozkut & Ceki Franko, 2011. "Portfolio Selection with Higher Moments: A Polynomial Goal Programming Approach to ISE-30 Index," Istanbul University Econometrics and Statistics e-Journal, Department of Econometrics, Faculty of Economics, Istanbul University, vol. 13(1), pages 41-61, Special I.
    2. Eugenio Peluso & Alain Trannoy, 2012. "Preserving dominance relations through disaggregation: the evil and the saint," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 39(2), pages 633-647, July.
    3. Juliane Proelss & Denis Schweizer, 2014. "Polynomial goal programming and the implicit higher moment preferences of US institutional investors in hedge funds," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 28(1), pages 1-28, February.
    4. Li, Yulin & Wald, John K. & Wang, Zijun, 2020. "Sovereign bonds, coskewness, and monetary policy regimes," Journal of Financial Stability, Elsevier, vol. 50(C).
    5. Back, Kerry, 2014. "A characterization of the coskewness–cokurtosis pricing model," Economics Letters, Elsevier, vol. 125(2), pages 219-222.

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    • G0 - Financial Economics - - General

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