Benchmark-based strategy for minimizing Riskiness

Jen-Wei Yang

Finance Research Letters, 2024, vol. 60, issue C

Abstract: This study develops an optimal benchmark-based strategy for determining the optimal managed portfolio weight vector by minimizing the Riskiness (proposed by Aumann and Serrano [2008]) of active portfolio returns. First, for increasing and concave incentive fees, this study confirms that no other active portfolio returns have greater utility than those generated using this optimal strategy; this finding is applicable for all risk-averse fund managers and institutional investors. Second, the optimal managed portfolio weight vector is derived and can be estimated through method-of-moments estimation. Finally, this study empirically identifies the statistical characteristics of this optimal strategy.

Keywords: Benchmark-based strategy; Incentive fee; Riskiness; Stochastic Dominance (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:60:y:2024:i:c:s1544612323012473

DOI: 10.1016/j.frl.2023.104875

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