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Optimal Portfolio Projections for Skew-Elliptically Distributed Portfolio Returns

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Abstract

We define the concept of optimal portfolio projection, a procedure that projects the vector of weights of the portfolio return to a lower dimension such that one can explicitly solve the problem of optimal portfolio selection for any given risk measure. We study the class of skew-elliptically distributed risks and show that following the proposed procedure, we are able to obtain explicit optimal weights for such risks, with a dramatic reduction of the complexity of such an optimization problem.

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Authors and Affiliations

  1. Dipartimento di Economia, Società e Politica (DESP), Università degli Studi di Urbino “Carlo Bo”, Via Saffi 42, 61029, Urbino, PU, Italy

    Nicola Loperfido

  2. Department of Business Administration, Guilford Glazer Faculty of Business and Management, Ben-Gurion University of the Negev, Beer-Sheva, Israel

    Tomer Shushi

Authors
  1. Nicola Loperfido
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  2. Tomer Shushi
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Correspondence to Tomer Shushi.

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Communicated by Arvind Raghunathan.

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Loperfido, N., Shushi, T. Optimal Portfolio Projections for Skew-Elliptically Distributed Portfolio Returns. J Optim Theory Appl 199, 143–166 (2023). https://doi.org/10.1007/s10957-023-02252-x

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