 Performance evaluation of optimized portfolio insurance strategiesDaniel Zieling, Antje Mahayni and Sven Balder Journal of Banking & Finance, 2014, vol. 43, issue C, 212-225 Abstract: We use S&P 500 index return data for the time period 1985–2013 to evaluate the performance of portfolio insurance strategies. We shed light on the question if the performance of a constant proportion portfolio insurance (CPPI) strategy can be improved by means of a time-varying multiplier which depends on the estimated future volatility. Neglecting any inter-temporal hedging demand, the theoretical foundation of the strategies is given by maximizing the expected utility of a HARA investor in a diffusion model setup. If the risk premium is assumed to be proportional to the variance, the optimal strategy is a CPPI strategy. Otherwise, the multiple is time-varying (PPI). It turns out that even time-varying multiple strategies based on a rolling window of historical volatility estimates give a significant improvement of CPPI strategies. The out-performance is robust w.r.t. alternative performance measures and is also true for proportional transaction costs and adequate trigger trading. Keywords: Portfolio insurance; Performance evaluation; S&P 500; Regime switching EGARCH-M model; Transaction costs; Trigger trading; Gap risk (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:43:y:2014:i:c:p:212-225 DOI: 10.1016/j.jbankfin.2014.03.027 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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