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SUMMARY:A Four-moment Portfolio Strategy for Emerging Equity Markets - War
 apong Wongwachara\, PhD student\, Department of Economics
DTSTART:20081118T170000Z
DTEND:20081118T180000Z
UID:TALK14882@talks.cam.ac.uk
CONTACT:Eva Gottschalk
DESCRIPTION:The research investigates an alternative prescriptive portfoli
 o strategy to the conventional mean-variance (MV) approach\, with applicat
 ion to emerging equity markets. Such markets deserve attention and empiric
 al investigation due to the evolving nature of their distinctive returns c
 haracteristics\, notably significant skewness and kurtosis. The portfolio 
 problem is built around expected utility maximisation (EUM) framework. A f
 our-moment (4M) approximation to the EUM – which takes into account the 
 third and fourth moments of the portfolio returns – is proposed\, and ev
 aluated. Employing MSCI equity market indices from January 2002 to May 200
 8\, the empirical results show that use of MV instead of 4M portfolio weig
 hts could incur significant certainty equivalent loss\, especially when th
 e level of risk aversion is high. The result also highlights the role of e
 merging markets in international diversification. [Hereafter\, work in pro
 gress] Simulations are employed to examine the 4M strategy’s robustness 
 to estimation error\, in the same spirit as Chopra and Ziemba (1993). The 
 positive simulation result would confirm the superiority of 4M over MV.
LOCATION:Winstanley Lecture Hall\, Trinity College
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