Abstract
The hypothesis that financial variables are normally distributed is often rejected in both theoretical studies and extremely specific cases. In the “real” world of financial investors — where risk averse agents mainly hold government bonds, a few equities and do not hold derivatives — the normal distribution still plays a lead role. To show this result, in this paper we focus on a number of efficient portfolios subject to several constraints which make them close to the portfolios held by most of financial agents. A multivariate approach is proposed, which refers to the case of a financial asset manager who cannot only pay attention to the average return of all of his portfolios, but must evaluate the risks associated to each of his portfolios jointly.
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Costa, M., Cavaliere, G., Iezzi, S. (2005). The Role of the Normal Distribution in Financial Markets. In: Bock, HH., et al. New Developments in Classification and Data Analysis. Studies in Classification, Data Analysis, and Knowledge Organization. Springer, Berlin, Heidelberg. https://doi.org/10.1007/3-540-27373-5_41
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DOI: https://doi.org/10.1007/3-540-27373-5_41
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-23809-6
Online ISBN: 978-3-540-27373-8
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