This paper extends the classic Samuelson (1970) and Merton (1973) model of optimal portfolio allocation with one risky asset and a riskless one to include the effect of the skewness. Using an extended version of Stein's Lemma, we provide the explicit solution for optimal demand that holds for...

How does market trend sentiment affect investors' asymmetric loss-gain tradeoffs? Several empirical tests indicate that investors are far more loss adverse during bull markets than during bear markets (see Hwang and Satchell, 2010; Hofschire et al, 2013). In this paper we provide a sound theoretical...

Since Shalit and Yitzhalit (1984) the Mean-Extended Gini (MEG) has been proposed as a workable alternative to the classical Markowitz mean-variance CAPM. Although MEG keeps under control the risk belonging to the left-tail of the return distribution, small attention is reserved to potential...