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Effect of intervalling and skewness on portfolio selection in developed and developing markets

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  • Chun-Hao Chang
  • Brice Dupoyet
  • Arun Prakash

Abstract

Based on several research studies and in particular the theoretical study of Prakash et al. (1997), it is known that the variance as well as the skewness of the probability distribution of rates of return increases if the investors' investment interval increases. In the present study, using the portfolio selection procedure developed by Lai (1991) under the presence of skewness and subsequently used by Chunhachinda et al. (1997) and Prakash et al. (2003), we find that the selection of investment interval (e.g. daily, weekly versus monthly) significantly changes not only the optimal allocation of weights, but also the number of markets selected in the portfolio.

Suggested Citation

  • Chun-Hao Chang & Brice Dupoyet & Arun Prakash, 2008. "Effect of intervalling and skewness on portfolio selection in developed and developing markets," Applied Financial Economics, Taylor & Francis Journals, vol. 18(21), pages 1697-1707.
    • Handle: RePEc:taf:apfiec:v:18:y:2008:i:21:p:1697-1707
    DOI: 10.1080/09603100701720419
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    References listed on IDEAS

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    7. Chunhachinda, Pornchai & Dandapani, Krishnan & Hamid, Shahid & Prakash, Arun J., 1997. "Portfolio selection and skewness: Evidence from international stock markets," Journal of Banking & Finance, Elsevier, vol. 21(2), pages 143-167, February.
    8. Hawawini, Gabriel A., 1980. "Intertemporal Cross-Dependence in Securities Daily Returns and the Short-Run Intervaling Effect on Systematic Risk," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(1), pages 139-149, March.
    9. Martikainen, Teppo & Perttunen, Jukka & Yli-Olli, Paavo & Gunasekaran, A., 1994. "The impact of the return interval on common factors in stock returns: Evidence from a thin security market," Journal of Banking & Finance, Elsevier, vol. 18(4), pages 659-672, September.
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    Cited by:

    1. Briec, Walter & Kerstens, Kristiaan & Van de Woestyne, Ignace, 2013. "Portfolio selection with skewness: A comparison of methods and a generalized one fund result," European Journal of Operational Research, Elsevier, vol. 230(2), pages 412-421.
    2. Farshad Noravesh & Kristiaan Kerstens, 2022. "Some connections between higher moments portfolio optimization methods," Papers 2201.00205, arXiv.org.
    3. Briec, Walter & Kerstens, Kristiaan & Van de Woestyne, Ignace, 2011. "Portfolio Selection with Skewness: A Comparison and a Generalized Two Fund Separation Result," Working Papers 2011/09, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.

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