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Benchmark-based strategy for minimizing Riskiness

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  • Yang, Jen-Wei

Abstract

This study develops an optimal benchmark-based strategy for determining the optimal managed portfolio weight vector by minimizing the Riskiness (proposed by Aumann and Serrano [2008]) of active portfolio returns. First, for increasing and concave incentive fees, this study confirms that no other active portfolio returns have greater utility than those generated using this optimal strategy; this finding is applicable for all risk-averse fund managers and institutional investors. Second, the optimal managed portfolio weight vector is derived and can be estimated through method-of-moments estimation. Finally, this study empirically identifies the statistical characteristics of this optimal strategy.

Suggested Citation

  • Yang, Jen-Wei, 2024. "Benchmark-based strategy for minimizing Riskiness," Finance Research Letters, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:finlet:v:60:y:2024:i:c:s1544612323012473
    DOI: 10.1016/j.frl.2023.104875
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