Investor preferences and portfolio selection: is diversification an appropriate strategy?

References

• Aggarwal , R and Aggarwal , R . 1993 . Security return distributions and market structure: evidence from the NYSE/AMEX and the Nasdaq markets. . J. Financ. Res. , 16 : 209 – 220 .
   Google Scholar
• Arrow , KJ . 1974 . Essays in the Theory of Risk Bearing , New York : Elsevier .
   Google Scholar
• Barber , BM and Odean , T . 2000 . Trading is hazardous to your wealth: the common stock investment performance of individual investors. . J. Finance , 55 : 773 – 806 .
   Web of Science ®Google Scholar
• Barberis , N and Huang , M . 2005 . Stocks as lotteries: the implications of probability weighting for security prices , Working paper, Yale University .
   Google Scholar
• Bekaert , G and Wu , G . 2000 . Asymmetric volatility and risk in equity markets . Rev. Financ. Stud. , 13 : 1 – 42 .
   Web of Science ®Google Scholar
• Bollerslev , T . 1987 . A conditionally heteroskedastic time series model for speculative prices and rates of return . Rev. Econ. Stat , 69 : 542 – 547 .
   Web of Science ®Google Scholar
• Bollerslev , T , Chou , RY and Kroner , KF . 1992 . ARCH modeling in finance: a review of the theory and empirical evidence . J. Economet , 52 : 5 – 59 .
   Web of Science ®Google Scholar
• Campbell , JY , Lettau , M , Malkiel , BG and Xu , Y . 2001 . Have individual stocks become more volatile? An empirical exploration of idiosyncratic risk. . J. Finance , 56 : 1 – 43 .
   Web of Science ®Google Scholar
• Cooley , PL . 1977 . A multidimensional analysis of institutional investor perception of risk . J. Finance , 32 : 67 – 78 .
   Google Scholar
• Cromwell , NO , Taylor , W.R.L. and Yoder , JA . 2000 . Diversification across mutual funds in a three-moment world. . Appl. Econ. Lett. , 7 : 243 – 245 .
   Web of Science ®Google Scholar
• Engle , RF and Ng , VK . 1993 . Measuring and testing the impact of news on volatility. . J. Finance , 48 : 1749 – 1778 .
   Web of Science ®Google Scholar
• Evans , J and Archer , S . 1968 . Diversification and the reduction of dispersion: an empirical analysis. . J. Finance , 23 : 761 – 767 .
   Web of Science ®Google Scholar
• Fielitz , B . 1974 . Indirect versus direct diversification. . Financ. Manag. , 3 : 54 – 62 .
   Web of Science ®Google Scholar
• Gaivoronski , AA and Pflug , G . 2004 . Value-at-risk in portfolio optimization: properties and computational approach. . J. Risk , 7 : 1 – 31 .
   Google Scholar
• Glosten , LR , Jagannathan , R and Runkle , DE . 1993 . On the relation between the expected value and the volatility of the normal excess return on stocks. . J. Finance , 48 : 1779 – 1801 .
   Web of Science ®Google Scholar
• Goetzmann , W and Kumar , A . 2002 . Equity portfolio diversification , Yale ICF Working Paper No. 00-59 .
   Google Scholar
• Greene , WH . 2003 . Econometric Analysis, , fifth edition , Englewood Cliffs, NJ : Prentice Hall .
   Google Scholar
• Guidolin , M and Timmermann , A . 2006 . Term structure of risk under alternative econometric specifications. . J. Econometrics , 131 : 285 – 308 .
   Web of Science ®Google Scholar
• Hansen , BE . 1994 . Autoregressive conditional density estimation. . Int. Econ. Rev. , 35 : 705 – 730 .
   Web of Science ®Google Scholar
• Harvey , CR and Siddique , A . 2000 . Conditional skewness in asset pricing tests. . J. Finance , 55 : 1263 – 1295 .
   Web of Science ®Google Scholar
• Johnson , NL . 1949 . Systems of frequency curves generated by methods of translation. . Biometrika , 36 : 149 – 176 .
   PubMed Web of Science ®Google Scholar
• Kraus , A and Litzenberger , H . 1976 . Skewness preference and the valuation of risky assets. . J. Finance , 31 : 1085 – 1100 .
   Web of Science ®Google Scholar
• Kumar , A . 2005 . Institutional skewness preferences and the idiosyncratic skewness premium , Working paper, University of Notre Dame .
   Google Scholar
• Lintner , J . 1965 . Security prices, risk, and maximal gains from diversification. . J. Finance , 20 : 587 – 615 .
   Web of Science ®Google Scholar
• Malevergne , Y and Sornette , D . 2004 . VaR-efficient portfolios for a class of super- and sub-exponentially decaying assets returns distributions. . Quant. Fin. , 4 : 17 – 36 .
   Web of Science ®Google Scholar
• Malevergne , Y and Sornette , D . 2005 . Higher-moment portfolio theory . J. Portfolio Manag , 31 ( 4 ) : 49 – 55 .
   Web of Science ®Google Scholar
• McDonald , JB and Newey , WK . 1988 . Partially adaptive estimation of regression models via the generalized . t distribution.Economet. Theory , 4 : 428 – 457 .
   Web of Science ®Google Scholar
• Mitton , T and Vorkink , K . 2006 . Equilibrium underdiversification and the preference for skewness . Rev. Financ. Stud , forthcoming
   Google Scholar
• Nelson , CR and Siegel , AF . 1987 . Parsimonious modeling of yield curves . J. Business , 60 ( 4 ) : 473 – 489 .
   Web of Science ®Google Scholar
• Newey , WK . 1985 . Generalized method of moments specification testing. . J. Econometrics , 29 : 229 – 256 .
   Web of Science ®Google Scholar
• Newey , WK and West , KD . 1987 . A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix . Econometrica , 55 : 703 – 708 .
   Web of Science ®Google Scholar
• Newey , WK and West , KD . 1994 . Automatic lag selection in covariance matrix estimation. . Rev. Econ. Stud. , 61 : 631 – 653 .
   Web of Science ®Google Scholar
• Premaratne , G and Tay , AS . 2002 . “ How should we interpret evidence of time varying conditional skewness? Manuscript ” . In Department of Economics , University of Singapore .
   Google Scholar
• Sharpe , WF . 1964 . Capital asset prices: a theory of market equilibrium under conditions of risk. . J. Finance , 19 : 425 – 442 .
   Web of Science ®Google Scholar
• Simkowitz , MA and Beedles , WL . 1978 . Diversification in a three-moment world. . J. Financ. Quant. Anal. , 13 : 927 – 941 .
   Web of Science ®Google Scholar
• Theodossiou , P . 1998 . Financial data and the skewed generalized t distribution. . Manag. Sci. , 44 : 1650 – 1661 .
   Web of Science ®Google Scholar
• Wang , K , Fawson , C , Barrett , C and McDonald , JB . 2001 . A flexible parametric GARCH model with an application to exchange rates . J. Appl. Economet , 16 : 521 – 536 .
   Web of Science ®Google Scholar