Naslov
Estimating investor preferences towards portfolio return distribution in investment funds

Autori
Gardijan, Margareta ; Škrinjarić, Tihana

Izvornik
Croatian operational research review (1848-0225) 6 (2015), 1; 1-16

Vrsta, podvrsta i kategorija rada
Radovi u časopisima, članak, znanstveni

Ključne riječi
higher distribution moments ; investor preferences ; higher moments CAPM ; Croatian investment funds

Sažetak
Recent research in the field of investor preference has emphasised the need to go beyond just simply analyzing the first two moments of a portfolio return distribution used in a MV (mean-variance) paradigm. The suggestion is to observe an investor's utility function as an nth order Taylor approximation. In such terms, the assumption is that investors prefer greater values of odd and smaller values of even moments. In order to investigate the preferences of Croatian investment funds, an analysis of the moments of their return distribution is conducted. The sample contains data on monthly returns of 30 investment funds in Croatia for the period from January 1999 to May 2014. Using the theoretical utility functions (DARA, CARA, CRRA), we compare changes in their preferences when higher moments are included. Moreover, we investigate an extension of the CAPM model in order to find out whether including higher moments can explain better the relationship between the awards and risk premium, and whether we can apply these findings to estimate preferences of Croatian institutional investors. The results indicate that Croatian institutional investors do not seek compensation for bearing greater market risk.

Izvorni jezik
Engleski

Znanstvena područja
Matematika, Ekonomija

POVEZANOST RADA