A Performance Measure of Zero-Dollar Long/Short Equally Weighted Portfolios
AbstractSharpe-like ratios have been traditionally used to measure the performances of portfolio managers. However, they suffer two intricate drawbacks (1) they are relative to a perr's performance and (2) the best score is generally assumed to correspond to a "good" portfolio allocation, with no guarantee on the goodness of this allocation. In this paper, we propose a new measure to quantify the goodness of an allocation and we show how to estimate this measure in the case of the strategy used to track the momentum effect, namely the Zero-Dollar Long/Short Equally Weighted (LSEW) investment strategy. Finally, we show how to use this measure to timely close the positions of an invested portfolio.
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Bibliographic InfoPaper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00476038.
Date of creation: Mar 2010
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Portfolio management; performance measure; generalized hyperbolic distribution.;
Other versions of this item:
- Monica Billio & Ludovic Calès & Dominique Guegan, 2010. "A performance measure of Zero-dollar Long/Short equally weighted portfolios," Documents de travail du Centre d'Economie de la Sorbonne, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne 10030, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
- C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
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