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Title: Higher order moments of the estimated tangency portfolio weights Authors:  Farrukh Javed - Orebro University (Sweden)
Stepan Mazur - Orebro University (Sweden) [presenting]
Edward Ngailo - Linkoping University (Sweden)
Abstract: The estimated weights of the tangency portfolio are considered. We derive analytical expressions for the higher order non-central and central moments of these weights when the returns are assumed to be independently and multivariate normally distributed. Moreover, the expressions for mean, variance, skewness and kurtosis of the estimated weights are obtained in closed-forms. Later, we complement our results with a simulation study where data from the multivariate normal and t-distributions are simulated and the first four moments of estimated weights are computed by using the Monte Carlo experiment. It is noteworthy to mention that the distributional assumption of returns is found to be important, especially, for the first two moments. Finally, through an empirical study utilizing returns of four financial indices listed in the NASDAQ stock exchange, we observe the presence of time dynamics in higher moments.