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Portfolio Selection with Higher Moments: A Polynomial Goal Programming Approach to ISE-30 Index

Author

Listed:
  • Gulder Kemalbay

    (Yildiz Teknik University)

  • C. Murat Ozkut

    (Izmir University of Economics)

  • Ceki Franko

    (Izmir University of Economics)

Abstract

The aim of this paper is to propose a portfolio selection model which takes into account the investors preferences for higher return moments such as skewness and kurtosis. In the presence of skewness and kurtosis, the portfolio selection problem can be characterized with multiple conflicting and competing objective functions such as maximizing expected return and skewness, and minimizing risk and kurtosis, simultaneously. By constructing polynomial goal programming, in which investor preferences for skewness and kurtosis incorporated, a Turkish Stock Market example will be presented for the period from January 2005 to December 2010.

Suggested Citation

  • 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.
    • Handle: RePEc:ist:ancoec:v:13:y:2011:i:1:p:41-61
    as

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    File URL: http://eidergisi.istanbul.edu.tr/sayi13/iueis13m3.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Mean-Variance-Skewness-Kurtosis Portfolio Model; Polynomial Goal Programming; Risk Preference.;
    All these keywords.

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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