Optimal portfolio strategy under rolling economic maximum drawdown constraints
type: Item
instance of: scholarly article
title: Optimal portfolio strategy under rolling economic maximum drawdown constraints
zbMATH Open document ID: 1407.91241
DOI: 10.1155/2014/787943
author: Xiaojian Yu
author: Siyu Xie
author: Weijun Xu
published in: Mathematical Problems in Engineering
publication date: 2019-02-08T00:00:00Z
review text: Summary: This paper deals with the problem of optimal portfolio strategy under the constraints of rolling economic maximum drawdown. A more practical strategy is developed by using rolling Sharpe ratio in computing the allocation proportion in contrast to existing models. Besides, another novel strategy named ``\textit{REDP strategy}'' is further proposed, which replaces the rolling economic drawdown of the portfolio with the rolling economic drawdown of the risky asset. The simulation tests prove that \textit{REDP strategy} can ensure the portfolio to satisfy the drawdown constraint and outperforms other strategies significantly. An empirical comparison research on the performances of different strategies is carried out by using the 23-year monthly data of SPTR, DJUBS, and 3-month T-bill. The investment cases of single risky asset and two risky assets are both studied in this paper. Empirical results indicate that the \textit{REDP strategy} successfully controls the maximum drawdown within the given limit and performs best in both return and risk.
Mathematics Subject Classification ID: 91G10
Mathematics Subject Classification ID: 93E20
zbMATH DE Number: 7017263
Wikidata QID: Q59072199
MaRDI profile type: Publication
full work available at URL: https://doi.org/10.1155/2014/787943
OpenAlex ID: W2062070447
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description: scientific article; zbMATH DE number 7017263