Choosing Mean-Variance Over Skewness Seeking for Optimal Portfolio Performance
The article compares portfolios based on traditional risk-return models with portfolios that focus on high skewness in returns. While normal models assume returns follow a bell curve, real-world assets often have positive skewness. The study finds that while portfolios with high skewness may offer advantages, the probability of getting higher returns from them is generally low. This suggests that sticking to traditional mean-variance optimization is usually a better choice for building investment portfolios.