A Coskewness Shrinkage Approach for Estimating the Skewness of Linear Combinations of Random Variables*

Kris Boudt, Dries Cornilly, Tim Verdonck

Onderzoeksoutput: Article

5 Citaten (Scopus)

Samenvatting

Decision-making in finance often requires an accurate estimate of the coskewness matrix to optimize the allocation to random variables with asymmetric distributions. The classical sample estimator of the coskewness matrix performs poorly for small sample sizes. A solution is to use shrinkage estimators, defined as the convex combination between the sample coskewness matrix and a target matrix. We propose unbiased consistent estimators for the MSE loss function and include the possibility of having multiple target matrices. In a portfolio application, we find that the proposed shrinkage coskewness estimators are useful in mean–variance–skewness efficient portfolio allocation of funds of hedge funds.
Originele taal-2English
Pagina's (van-tot)1-23
Aantal pagina's23
TijdschriftJournal of Financial Econometrics
Volume18
Nummer van het tijdschrift1
Vroegere onlinedatum4 okt 2018
DOI's
StatusPublished - 1 jan 2021

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