Robust drawdown-based performance measures

Noureddine Kouaissah () and Amin Hocine ()
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Noureddine Kouaissah: Excelia Business School, CERIIM, La Rochelle, France
Amin Hocine: International University of Rabat, RBS College of Management, BEARLab

Economics Bulletin, 2022, vol. 42, issue 2, 513 - 522

Abstract: In this paper, we propose a robust optimization framework for drawdown-based performance measures that substantially improves upon conventional portfolio choices. In particular, we motivate and develop a robust optimization method that is typically used with conventional robust statistical estimation techniques, directly and explicitly addressing the estimation errors in the portfolio optimization process of the drawdown-based performance measures. Empirical analyses validate the proposed methodologies and confirm that robust drawdown-based performance measures yield better out-of-sample performance than their classic versions.

Keywords: Portfolio selection; robust portfolio optimization; drawdown-based performance measures (search for similar items in EconPapers)
JEL-codes: C1 G1 (search for similar items in EconPapers)
Date: 2022-06-30
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