Challenging the robustness of optimal portfolio investment with moving average-based strategies
Ahmed Bel Hadj Ayed,
Grégoire Loeper and
Quantitative Finance, 2019, vol. 19, issue 1, 123-135
The aim of this paper is to compare the performance of a theoretically optimal portfolio with that of a moving average-based strategy in the presence of parameter misspecification. The setting we consider is that of a stochastic asset price model where the trend follows an unobservable Ornstein–Uhlenbeck process. For both strategies, we provide the asymptotic expectation of the logarithmic return as a function of the model parameters. Then, numerical examples are given, showing that an investment strategy using a moving average crossover rule is more robust than the optimal strategy under parameter misspecification.
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Persistent link: https://EconPapers.repec.org/RePEc:taf:quantf:v:19:y:2019:i:1:p:123-135
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