Skewness and portfolio selection evidence from Singapore

• Main Author: Pan, Yu Ming
• Other Authors: Sun Qian
• Format: Theses and Dissertations
• Language: English
• Published: 2011
• Subjects: DRNTU::Business::Finance::Portfolio management
• Online Access: http://hdl.handle.net/10356/42646
• Institution: Nanyang Technological University

Preliminary investigation and normality tests had revealed the prevalence of nonnormality and evidenced the existence of positive skewness in common stock returns. Next, skewness persistence tests were carried out using the bootstrap method. The results showed that skewness in individual stock returns were persistent over time. In a bid to retain and manipulate skewness in portfolios, Lai's Polynomial Goal Programming model was adapted to construct Mean-Variance-Skewness efficient portfolios (MVS portfolios). Then, the bootstrap methodology was also applied to test skewness persistence in MVS portfolios. It was demonstrated that skewness could be retained and manipulated in portfolios. However, evidences on persistence of such skewness were mixed. As a whole, MVS showed strong and consistent persistence, which implied that such portfolios were likely to succeed. However, economic recession may cause these MVS portfolios to fail.