This paper presents a comparative analysis of three major approaches to portfolio strategies: the maximization of the Sharpe ratio, the minimization of the Expected Shortfall and "zero-intelligence"trading. Data from financial time series and from a simulated order-book are used to analyse how various strategies affect investors' portfolio performance and volatility. Results show, firstly, that the superiority of technical and analytical approaches over a random strategy is not obvious. Secondly, that strategies with lower and less risky profits may reveal preferable to those with higher returns and risk. Balancing this trade-off is crucial for stable financial growth.
Trading strategies and Financial Performances: A simulation approach
Biondo, Alessio Emanuele;Mazzarino, Laura
;Pluchino, Alessandro
2024-01-01
Abstract
This paper presents a comparative analysis of three major approaches to portfolio strategies: the maximization of the Sharpe ratio, the minimization of the Expected Shortfall and "zero-intelligence"trading. Data from financial time series and from a simulated order-book are used to analyse how various strategies affect investors' portfolio performance and volatility. Results show, firstly, that the superiority of technical and analytical approaches over a random strategy is not obvious. Secondly, that strategies with lower and less risky profits may reveal preferable to those with higher returns and risk. Balancing this trade-off is crucial for stable financial growth.File | Dimensione | Formato | |
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