Optimal portfolio allocation with higher moments

@article{Cvitani2007OptimalPA,
  title={Optimal portfolio allocation with higher moments},
  author={J. Cvitani{\'c} and Vassilis Polimenis and F. Zapatero},
  journal={Annals of Finance},
  year={2007},
  volume={4},
  pages={1-28}
}
We model the risky asset as driven by a pure jump process, with non-trivial and tractable higher moments. We compute the optimal portfolio strategy of an investor with CRRA utility and study the sensitivity of the investment in the risky asset to the higher moments, as well as the resulting wealth loss from ignoring higher moments. We find that ignoring higher moments can lead to significant overinvestment in risky securities, especially when volatility is high. 

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