why do we ignore kurtosis and skew?

 

Why do we continue to ignore skew and kurtosis? See "The Impact of Skewness and Fat Tails on the Asset Allocation Decision". We know that most assets have fat tails and negative skew yet we continue to ignore these two distribution features with our mean variance optimization. Perhaps the impact is not that large to some, yet the effect is strong enough to create asset allocation differences. More importantly, not accounting for kurtosis will lead to under-representing the risk for any asset, and as shown in the graph the risk much more undervalued with credit instruments. 

Follow the skew and kurtosis.