 Forecasting systemic risk in portfolio selection: The role of technical trading rulesNoureddine Kouaissah and Amin Hocine Journal of Forecasting, 2021, vol. 40, issue 4, 708-729 Abstract: This paper proposes and implements methods for determining whether incorporating technical trading rules accurately forecasts systemic risk and improves the performance of out‐of‐sample portfolios. The proposed methodology considers various trading rules for forecasting and addressing potential systemic risk in portfolio selection problems. The method incorporates major trading rules as early warning systems or alarm rules to detect market failure within diverse reward–risk measures. Methodologically, the alarm rules are integrated into portfolio selection strategies that predict returns using multifactor models. Therefore, the portfolio strategies combine the predictive ability of both technical trading rules and multifactor models. Empirical analyses validate the suggested approaches and evaluate the impacts of different technical trading rules on portfolio selection problems. This paper compares the ex ante sample paths of several portfolio strategies aiming to maximize portfolio wealth using either reward–risk or drawdown‐based performance measures. The results show that the proposed methodologies outperform the classic approach in terms of out‐of‐sample performance. Date: 2021 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:jforec:v:40:y:2021:i:4:p:708-729 Access Statistics for this article Journal of Forecasting is currently edited by Derek W. Bunn More articles in Journal of Forecasting from John Wiley & Sons, Ltd. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.