Alternative performance ratios well-fitting non-normal return distri butions are studied. An integrated aid system for asset allocation based on a toolkit of eleven different reward-risk ratios is suggested. Specifically, we suggest the use of one-sided performance ratios which are able to capture the asymmetrical information on “good” volatility (above a benchmark) and “bad” volatility (below a benchmark). Furthermore, we recommend to solve the portfolio optimization problem by considering a re-allocation setting through a given horizon, since investment decisions depend on trading strategies varying over time, in the sense of Jensen (1969).
Portfolio Choices using One-Sided, Dispersion and Quantile Risk Measures
TIBILETTI, Luisa
2005-01-01
Abstract
Alternative performance ratios well-fitting non-normal return distri butions are studied. An integrated aid system for asset allocation based on a toolkit of eleven different reward-risk ratios is suggested. Specifically, we suggest the use of one-sided performance ratios which are able to capture the asymmetrical information on “good” volatility (above a benchmark) and “bad” volatility (below a benchmark). Furthermore, we recommend to solve the portfolio optimization problem by considering a re-allocation setting through a given horizon, since investment decisions depend on trading strategies varying over time, in the sense of Jensen (1969).
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