Determining an optimal multiplier in dynamic core-satellite strategies

Thibaut Caliman, Catherine D'Hondt and Mikael Petitjean

Journal of Asset Management, 2013, vol. 14, issue 4, No 2, 210-227

Abstract: Abstract This article investigates the performance of various multiplier techniques in reducing downside risk for dynamic core-satellite portfolios. Using Monte Carlo simulations calibrated on monthly data for three different portfolios over a 10-year period, we show that the dynamic IR/TE multiplier offers the best level of capital protection, as the specified floor is violated in less than 1 per cent of the cases. Even though other multipliers might offer higher average excess returns, the IR/TE multiplier still captures a significant fraction of the satellite excess return. In addition, it delivers an almost constant average floor violation rate.

Keywords: dynamic; core; satellite; multiplier; downside risk; protection (search for similar items in EconPapers)
Date: 2013
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Working Paper: Determining an optimal multiplier in dynamic core-satellite strategies (2013)
Working Paper: Determining an optimal multiplier in dynamic core-satellite strategies (2013)
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DOI: 10.1057/jam.2013.16

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