A new asset allocation technique to reduce financial portfolio risk

Gino Gandolfi (), Antonella Sabatini and Monica Rossolini
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Gino Gandolfi: Via J.F Kennedy

Journal of Asset Management, 2011, vol. 12, issue 6, No 5, 418-425

Abstract: Abstract The objective of this work is to illustrate an active portfolio management methodology reducing the risk of the portfolio through stabilization of returns, by applying the proportional, integral, derivative (PID) control on the pure portfolio return variable. Two portfolios are analyzed and their financial performance is compared: the PID methodology implementation yielding the experimental portfolio on one side, and its corresponding benchmark, the DJ Euro Stoxx 50 Index on the other side. The experimental portfolio is able to diminish the volatility, and in particular, to accomplish a smaller down side risk than its corresponding benchmark.

Keywords: PID Control; feedback systems; active strategy; portfolio management; portfolio risk; asset allocation (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1057/jam.2011.22

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