Backward/forward optimal combination of performance measures for equity screening

Monica Billio, Massimiliano Caporin and Michele Costola

No 2012_13, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: We introduce a novel criterion for performance measure combination designed to be used as an equity screening algorithm. The proposed approach follows the general idea of linearly combining existing performance measures with positive weights and the combination weights are determined by means of an optimisation problem. The underlying criterion function takes into account the risk-return trade-off potentially associated with the equity screens, evaluated on a historical and rolling basis. By construction, performance combination weights can vary over time, allowing for changes in preferences across performance measures. An empirical example shows the benefits or our approach compared to naive screening rules based on the Sharpe ratio.

Keywords: performance measures; combining performance measures; portfolio allocation; equity screening; differential evolution. (search for similar items in EconPapers)
JEL-codes: C44 C58 C61 G11 G17 (search for similar items in EconPapers)
Pages: 31
Date: 2012
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Backward/forward optimal combination of performance measures for equity screening (2015)
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