Title
Performance evaluation of portfolio insurance strategies using stochastic dominance criteria Performance evaluation of portfolio insurance strategies using stochastic dominance criteria
Author
Faculty/Department
Faculty of Applied Economics
Publication type
article
Publication
Amsterdam ,
Subject
Economics
Source (journal)
Journal of banking and finance. - Amsterdam
Volume/pages
33(2009) :2 , p. 272-280
ISSN
0378-4266
ISI
000262113300010
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
This paper evaluates the performance of the stop-loss, synthetic put and constant proportion portfolio insurance techniques based on a block-bootstrap simulation. We consider not only traditional performance measures, but also some recently developed measures that capture the non-normality of the return distribution (value-at-risk, expected shortfall, and the Omega measure). We compare them to the more comprehensive stochastic dominance criteria. The impact of changing the rebalancing frequency and level of capital protection is examined. We find that, even though a buy-and-hold strategy generates higher average excess returns, it does not stochastically dominate the portfolio insurance strategies, nor vice versa. Our results indicate that a 100% floor value should be preferred to lower floor values and that daily-rebalanced synthetic put and CPPI strategies dominate their counterparts with less frequent rebalancing.
E-info
https://repository.uantwerpen.be/docman/iruaauth/905074/7e8d632c05a.pdf
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