Excluding the assumption of normality in return distributions, a general reward-risk ratio suitable to compare portfolio returns with respect to a benchmark must includes symmetrical information on both “good” volatility (above the benchmark) and “bad” volatility (below the benchmark), with different sensitivities. Including the Farinelli-Tibiletti ratio and few other indexes recently proposed by the literature, the class of one-sided variability measures achieves the goal. We investigate the forecasting ability of eleven alternatives ratios in portfolio optimization problems. We employ data from security mar- kets to quantify the portfolio’s overperformance with respect to a given benchmark.
Computation Asset Allocation Using One-Sided and Two-Sided Variability Measures
TIBILETTI, Luisa
2006-01-01
Abstract
Excluding the assumption of normality in return distributions, a general reward-risk ratio suitable to compare portfolio returns with respect to a benchmark must includes symmetrical information on both “good” volatility (above the benchmark) and “bad” volatility (below the benchmark), with different sensitivities. Including the Farinelli-Tibiletti ratio and few other indexes recently proposed by the literature, the class of one-sided variability measures achieves the goal. We investigate the forecasting ability of eleven alternatives ratios in portfolio optimization problems. We employ data from security mar- kets to quantify the portfolio’s overperformance with respect to a given benchmark.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.