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 |
Autori interni: | |
Data di pubblicazione: | 2008 |
Rivista: | |
Handle: | http://hdl.handle.net/20.500.11769/7221 |
Appare nelle tipologie: | 1.1 Articolo in rivista |