Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5096724 | Journal of Econometrics | 2009 | 17 Pages |
Abstract
We show that the distribution of any portfolio whose components jointly follow a location-scale mixture of normals can be characterised solely by its mean, variance and skewness. Under this distributional assumption, we derive the mean-variance-skewness frontier in closed form, and show that it can be spanned by three funds. For practical purposes, we derive a standardised distribution, provide analytical expressions for the log-likelihood score and explain how to evaluate the information matrix. Finally, we present an empirical application in which we obtain the mean-variance-skewness frontier generated by the ten Datastream US sectoral indices, and conduct spanning tests.
Related Topics
Physical Sciences and Engineering
Mathematics
Statistics and Probability
Authors
Javier MencÃa, Enrique Sentana,