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  • Open Daily: 10am - 10pm
    Alley-side Pickup: 10am - 7pm

    3038 Hennepin Ave Minneapolis, MN
    612-822-4611

Open Daily: 10am - 10pm | Alley-side Pickup: 10am - 7pm
3038 Hennepin Ave Minneapolis, MN
612-822-4611
The Use of Copulas in Asset Allocation

The Use of Copulas in Asset Allocation

Riccetti, Luca

Paperback

Business General

ISBN10: 6208450004
ISBN13: 9786208450007
Publisher: LAP Lambert Academic Publishing
Published: Jun 13 2025
Pages: 104
Weight: 0.33
Height: 0.25 Width: 6.00 Depth: 9.00
Language: English
This study critically examines the limitations of the mean-variance criterion, developed by Markowitz, in portfolio allocation-particularly when returns deviate from Normality. Since expected utility cannot always be accurately represented under non-Normal return distributions, the author explores whether the loss of optimality in using the mean-variance approach is significant or negligible. Through a comparative analysis of optimal portfolio compositions, the research evaluates the cost of the Markowitz allocation versus strategies based on copula models (Normal, Student-t, Clayton, Gumbel, Frank, mixed, and Canonical Vine copulas). Portfolios of two or more assets and various index combinations are used to assess whether copula-based models enhance investor utility and returns. The study also investigates whether incorporating higher-order moments and co-moments (up to the fourth) can approximate copula-based optimization. This research is particularly relevant for investment fund asset managers and academic researchers seeking advanced tools in financial econometrics.

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