As the assumption of normality in return distributions is relaxed, classic Sharpe ratio and its descendants become questionable tools for constructing optimal portfolios. In order to overcome the problem, asymmetrical parameter-dependent performance ratios have been recently proposed in the literature. The aim of this note is to develop an integrated decision aid system for asset allocation based on a toolkit of eleven performance ratios. A multi-period portfolio optimization up covering a fixed horizon is set up: at first, bootstrapping of asset return distributions is assessed to recover all ratios calculations; at second, optimal rebalanced-weights are achieved; at third, optimal final wealth is simulated for each ratios. Eventually, we make a robustness test on the best performance ratios. Empirical simulations confirm the weakness in forecasting of Sharpe ratio, whereas asymmetrical parameter-dependent ratios, such as the Generalized Rachev, Sortino–Satchell and Farinelli–Tibiletti ratios show satisfactorily robustness.
|Titolo:||Beyond Sharpe ratio: Optimal asset allocation using different performance ratios|
|Data di pubblicazione:||2008|
|Citazione:||Beyond Sharpe ratio: Optimal asset allocation using different performance ratios / S. FARINELLI; M. FERREIRA; ROSSELLO A; ROSSELLO A; L. TIBILETTI. - In: JOURNAL OF BANKING & FINANCE. - ISSN 0378-4266. - 32(2008), pp. 2057-2063.|
|Appare nelle tipologie:||1.1 Articolo in rivista|