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.
2024
Sharpe ratio
Expected Shortfall
Portfolio performance
Order-book
Simulations
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/20.500.11769/640581
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