Should a skeptical portfolio insurer use an optimal or a risk-based multiplier?
Maxime Bonelli (maxime.bonelli@inria.fr) and
Daniel Mantilla-Garcia (daniel.mantilla@edhec.edu)
Additional contact information
Maxime Bonelli: Inria research centre Sophia Antipolis / Koris International
Daniel Mantilla-Garcia: Edhec-Risk / Koris International
Authors registered in the RePEc Author Service: Daniel Mantilla Garcia (d.mantillag@uniandes.edu.co)
No 802327, Proceedings of International Academic Conferences from International Institute of Social and Economic Sciences
Abstract:
Following recent evidence of out-of-sample stock market return predictability, the authors aim to evaluate whether the potential benefits suggested by asset allocation theory can actually be captured in the real world using expected return estimates from a predictive system. The question is addressed in the context of an investor maximizing the long-term growth rate of wealth under a maximum drawdown constraint, and compare the optimal strategy using the predictive system with a similar risk-based allocation strategy independent of expected return estimates. The authors find that the risk-based strategy implies nonetheless very variable and relatively high expected returns, and report important potential benefits in using the expected return estimates of the predictive system they used.
Keywords: financial econometrics; return predictability; asset allocation; portfolio insurance. (search for similar items in EconPapers)
JEL-codes: C58 G11 G17 (search for similar items in EconPapers)
Pages: 1 page
Date: 2014-10
New Economics Papers: this item is included in nep-ias and nep-upt
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Published in Proceedings of the Proceedings of the 13th International Academic Conference, Antibes, Oct 2014, pages 54-54
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Persistent link: https://EconPapers.repec.org/RePEc:sek:iacpro:0802327
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