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Benchmarking, portfolio insurance and technical analysis: a Monte Carlo comparison of dynamic strategies of asset allocation. (English) Zbl 1178.91175

Summary: This paper makes an extensive simulation comparison of popular dynamic strategies of asset allocation. For each strategy, alternative measures have been calculated for risk, return and risk-adjusted performance (Sharpe ratio, Sortino ratio, return at risk). Moreover, the strategies are compared in different market situations (bull, bear, no-trend markets) and with different market volatility, taking into account transaction costs and discrete rebalancing of portfolios. The simulations show a dominant role of constant proportion strategies in bear and no-trend markets and a preference for benchmarking strategies in bull markets. These results are independent of the volatility level and the risk-adjusted measure adopted.

MSC:

91G10 Portfolio theory
91G60 Numerical methods (including Monte Carlo methods)
91B30 Risk theory, insurance (MSC2010)

Software:

RiskMetrics
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References:

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