Scandinavian Working Papers in Business Administration

Working Papers,
Örebro University, School of Business

No 2017:10: Higher order moments of the estimated tangency portfolio weights

Farrukh Javed (), Stepan Mazur () and Edward Ngailo ()
Additional contact information
Farrukh Javed: Örebro University School of Business, Postal: Örebro University, School of Business, SE - 701 82 ÖREBRO, Sweden
Stepan Mazur: Örebro University School of Business, Postal: Örebro University, School of Business, SE - 701 82 ÖREBRO, Sweden
Edward Ngailo: Stockholm University, Postal: Stockholm University, SE-10691 Stockholm, Sweden

Abstract: In this paper we consider the estimated weights of tangency portfolio. The returns are assumed to be independently and multivariate normally distributed. We derive analytical expressions for the higher order non-central and central moments of these weights. Moreover, the expressions for mean, variance, skewness and kurtosis of the estimated weights are obtained in closed-forms. Finally, we complement our result with an empirical study where we analyze a portfolio with actual returns of eight nancial indexes listed in NASDAQ stock exchange.

Keywords: Tangency portfolio; higher order moments; Wishart distribution

JEL-codes: C10; C44

18 pages, December 7, 2017

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