R. P. Brito, H. Sebastião, P. Godinho
This paper proposes a flexible methodology for portfolio selection 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. This methodology is used empirically on four datasets, collected from the Fama/French data library. The out-of-sample performance of the skewness/semivariance model was assessed by choosing three portfolios belonging to each in-sample Pareto frontier and measuring their performance in terms of skewness per semivariance ratio, Sharpe ratio and Sortino ratio. Both the in-sample and the out-of-sample performance analyses were conducted using three different target returns for the semivariance computations. The results show that the efficient skewness/semivariance portfolios are consistently competitive when compared to several benchmark portfolios.
Keywords: Portfolio selection, semivariance, skewness, multiobjective optimization, derivative-free optimization
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TD1 Finance
May 31, 2016 3:00 PM
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