<abstract xmlns="http://www.w3.org/1999/xhtml"><p>The elaborate proposes a compact alternative methodology to the classical stocks portfolio optimization based on the normal distribution of the returns of the assets named Adaptable - Kurtosis Asymmetry model (A-KA). In the financial theory is well-known that odd-order moments of a distribution describe a particular performance characteristic; on the contrary, the even-order moments tell a precise sense of risk of a distribution of returns. If it is true that, in general terms, minimizing the variance also minimizes the volatility of portfolio return is also true that we should minimize the kurtosis to get away from unpleasant situations in case “Extreme” events occur, especially if negative. The idea behind this paper is to exploit the four moments of return’s distributions, optimizing an alternative risk indicator to variance, such as the kurtosis of the final distribution of the portfolio, making constraints on distributive asymmetry, in a dynamic underlying logic.</p></abstract>

The elaborate proposes a compact alternative methodology to the classical stocks portfolio optimization based on the normal distribution of the returns of the assets named Adaptable - Kurtosis Asymmetry model (A-KA). In the financial theory is well-known that odd-order moments of a distribution describe a particular performance characteristic; on the contrary, the even-order moments tell a precise sense of risk of a distribution of returns. If it is true that, in general terms, minimizing the variance also minimizes the volatility of portfolio return is also true that we should minimize the kurtosis to get away from unpleasant situations in case “Extreme” events occur, especially if negative. The idea behind this paper is to exploit the four moments of return’s distributions, optimizing an alternative risk indicator to variance, such as the kurtosis of the final distribution of the portfolio, making constraints on distributive asymmetry, in a dynamic underlying logic.

A-KA Model: an Optimization of the Stock’s Portofolio

Mathematical Methods of Economics and Actuarial and Financial Sciences – Dipartimento di Economia e Finanza

Zagreb International Review of Economics and Business

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

{"article-title":"A-KA Model: an Optimization of the Stock\u2019s Portofolio"}

The elaborate proposes a compact alternative methodology to the classical stocks portfolio optimization based on the normal distribution of the returns of the...

A-KA Model: an Optimization of the Stock’s Portofolio

Published Online: Dec 12, 2020

Page range: 21 - 40

DOI: https://doi.org/10.2478/zireb-2020-0012

Keywords
Asset Allocation, Portfolio construction, Stocks, Skewness, Kurtosis, Active Return, Re-balancing

© 2020 Filippo Regina et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

A-KA Model: an Optimization of the Stock’s Portofolio

Published Online: Dec 12, 2020

Page range: 21 - 40

DOI: https://doi.org/10.2478/zireb-2020-0012

KeywordsAsset Allocation, Portfolio construction, Stocks, Skewness, Kurtosis, Active Return, Re-balancing

© 2020 Filippo Regina et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Keywords
Asset Allocation, Portfolio construction, Stocks, Skewness, Kurtosis, Active Return, Re-balancing