We present a new model of asset prices in which investors evaluate risk according to
prospect theory and examine its ability to explain 23 prominent stock market anomalies. The …

This paper focuses on capturing the impacts of leptokurtic phenomenon and heterogeneous
preferences in higher moments on asset allocation. To achieve this, we propose a utility …

Since Markowitz's mean-variance framework, optimizing a portfolio that strikes a trade-off
between maximizing profit and minimizing risk has been ubiquitous in the financial industry …

When two variables are bivariate normally distributed, Stein's (1973, 1981) seminal lemma
provides a convenient expression for the covariance of the first variable with a function of the …

In this paper, we analyze the asset allocation problem under the generalized hyperbolic
(GH) distribution of returns and exponential utility. We provide closed-form expressions to …

We investigate a one-period portfolio optimization problem of a cumulative prospect theory
(CPT) investor with multiple risky assets and one risk-free asset. The returns of the multiple …

Portfolio selection problems that optimize expected utility are usually difficult to solve. If the
number of assets in the portfolio is large, such expected utility maximization problems …

Abstract This paper, following (Ghalanos, 2012), uses the simple method of embedding
skewness in asset allocation based on the Taylor expansion of the investor utility function up …

We present a two-stage lottery model with the generalized Wang transform as a probability
weighting function to formally derive investors' demand for the lottery-like security …

Objective: Portfolio risk measurement has always been one crucial aspect of finance.
Several approaches have been modeled through time and some traditional approaches are …