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Portfolio Optimization Using the Atkinson Index

Billgert, Nils LU (2019) NEKN01 20191
Department of Economics
Abstract
Traditional mean-variance optimization of portfolios has received much criticism due to its inability to account for higher order moments and non-quadratic utility. In this thesis, the topic of portfolio optimization is studied using the Atkinson index with CRRA utility. We construct Atkinson-efficient portfolios using computer-generated data in Monte Carlo simulations, as well as using financial asset returns data of assets taken from American stock exchanges. The results show that when normality holds, there are no benefits to the usage of the Atkinson. Under non-normality, however, there are advantages to using the Atkinson instead of the Sharpe ratio. These advantages are great enough for researchers to disregard its greater complexity.
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author
Billgert, Nils LU
supervisor
organization
course
NEKN01 20191
year
type
H1 - Master's Degree (One Year)
subject
keywords
atkinson index, performance measure, portfolio optimization
language
English
id
8981994
date added to LUP
2019-08-08 10:33:11
date last changed
2019-08-08 10:33:11
@misc{8981994,
  abstract     = {{Traditional mean-variance optimization of portfolios has received much criticism due to its inability to account for higher order moments and non-quadratic utility. In this thesis, the topic of portfolio optimization is studied using the Atkinson index with CRRA utility. We construct Atkinson-efficient portfolios using computer-generated data in Monte Carlo simulations, as well as using financial asset returns data of assets taken from American stock exchanges. The results show that when normality holds, there are no benefits to the usage of the Atkinson. Under non-normality, however, there are advantages to using the Atkinson instead of the Sharpe ratio. These advantages are great enough for researchers to disregard its greater complexity.}},
  author       = {{Billgert, Nils}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Portfolio Optimization Using the Atkinson Index}},
  year         = {{2019}},
}