Portfolio Management under Asymmetric Dependence and Distributio

  • Stefan Hlawatsch
  • Peter Reichling
Schlagworte: Asymmetric Dependency, Copula, Skewed t-Distribution, Conditional Value-at-Risk, Portfolio Optimization, JEL: C01, C13, C15, C16, C46, G11


Aim of our paper is to analyze the enhancement of portfolio management by using more sophisticated assumptions about distributions and dependencies of stock returns. We assume a skewed t-distribution of the returns according to Azzalini and Capitanio (2003) and a dependency structure following a Clayton copula. The risk measure applied to our portfolio selection changed from traditional portfolio variance to downside-oriented conditional value-at-risk. The empirical results show a superior performance of our approach compared to the Markowitz approach and to the approach proposed by Hatherley and Alcock (2007) on a risk-adjusted basis. The approach is applied on daily stock returns of 16 stocks of the EURO STOXX 50.