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GEMF

Grupo de Estudos Monetários e Financeiros

Estudos do GEMF, N.º 05 de 2015

   

Efficient Skewness/Semivariance Portfolios

“Uma versão mais desenvolvida deste trabalho foi aceite para publicação no Journal of Asset Management”


Rui Pedro Brito
Faculdade de Economia da Universidade de Coimbra

Hélder Sebastião
Faculdade de Economia da Universidade de Coimbra e GEMF

Pedro Godinho
Faculdade de Economia da Universidade de Coimbra e GEMF

Abstract:
This paper proposes a new way to measure and deal with risk within the portfolio selection problem using a skewness/semivariance biobjective optimization framework. The solutions of this biobjective optimization problem allow the investor to analyse the efficient trade-off between skewness and semivariance. Due to the endogeneity of the cosemivariance matrix, the biobjective problem is solved using a derivative-free algorithm based on direct multisearch. For four datasets, collected from the Fama/French benchmark collection, the direct multisearch was able to determine the in-sample Pareto frontier. The out-of-sample performance of the skewness/semivariance model was assessed by choosing three portfolios (the portfolio that maximizes a skewness per semivariance ratio, the portfolio that maximizes the Sharpe ratio and the portfolio that maximizes the Sortino ratio) at each in-sample Pareto frontier and measuring their performance in terms of skewness per semivariance ratio, Sharpe ratio, Sortino ratio and turnover. The results show that the efficient skewness/semivariance portfolios are consistently competitive, and often superior, comparatively to the benchmark portfolios considered. Both in-sample and the out-of-sample performance analysis were conducted using three different benchmark returns for the semivariance computations.

JEL Classification: C44; C58; C61; C63; C88; G11.


Keywords: portfolio selection, semivariance, skewness, multiobjective optimization, derivative-free optimization, direct multisearch.

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