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Smart beta and CPPI performance

David Ardia, Kris Boudt and Marjan Wauters

Finance, 2016, vol. 37, issue 3, 31-65

Abstract: CPPIs are popular medium- to long-term investment products that dynamically allocate between a risk-free asset and a risky portfolio, with the objective of combining upside potential with a capital guarantee. This paper uses a block-bootstrap evaluation approach to study whether combining smart beta and portfolio insurance is mutually beneficial under various scenarios. Our results show that the improvement in performance is most apparent for CPPIs combined with a low-risk equity portfolio. This finding is consistent with the negative vega of CPPIs and with path-dependency of the CPPI protection against portfolio losses between rebalancing dates.

Date: 2016
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