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Portfolio analysis with a nonnormal multi-index return-generating process


This article analyzes the investor's optimum portfolio problem when security returns follow a linear return-generating process with factors that are not normally distributed and that are not replicable with traded assets. It provides a set of decision rules that allows the construction of the investor's optimum portfolio. The article then derives the equilibrium model with heterogeneous expectations that results from all investors acting in the manner described in the first section.

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Elton, E.J., Gruber, M.J. Portfolio analysis with a nonnormal multi-index return-generating process. Rev Quant Finan Acc 2, 5–16 (1992).

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Key words

  • portfolio analysis
  • return-generating process
  • multi-index process