Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/288346 
Year of Publication: 
2020
Citation: 
[Journal:] Empirical Economics [ISSN:] 1435-8921 [Volume:] 61 [Issue:] 3 [Publisher:] Springer [Place:] Berlin, Heidelberg [Year:] 2020 [Pages:] 1435-1459
Publisher: 
Springer, Berlin, Heidelberg
Abstract: 
The paper considers a nonparametric approach to determine portfolio efficiency using specific directions toward the portfolio frontier function. This approach allows for a straightforward incorporation of higher moments of the returns distribution beyond mean and variance. The nonparametric approach is extended by the computation of optimal directions endogenously by maximizing the distance toward the portfolio frontier as a novel methodological feature. An empirical application to Fama–French portfolios demonstrates the applicability of the nonparametric approach. The results show that the optimal directions to the frontier depend on the portfolio considered as well as on the period for which the moments are estimated. Skewness in particular plays a role in determining the optimal direction, whereas kurtosis seems to be less crucial.
Subjects: 
Finance
Portfolio choice
Directional distance functions
Skewness and kurtosis
JEL: 
G11
C14
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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