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Constant or Variable? A Performance Analysis among Portfolio Insurance Strategies

Author

Listed:
  • Daniele Mancinelli

    (Department of Methods and Models for Economics, Territory and Finance, Sapienza University of Rome, 00161 Rome, Italy
    These authors contributed equally to this work.)

  • Immacolata Oliva

    (Department of Methods and Models for Economics, Territory and Finance, Sapienza University of Rome, 00161 Rome, Italy
    These authors contributed equally to this work.)

Abstract

In this paper, we propose a comparison among three portfolio insurance strategies, namely the constant proportion portfolio insurance, the time-invariant portfolio protection, and the exponential proportion portfolio insurance, via an in-depth performance analysis. We aim to ascertain whether strategies characterized by variable parameters can outperform those with constant parameters by measuring potential returns, investment riskiness, downside protection capability, and ability to capture market upside. The results, achieved in a model-free framework by exploiting bootstrapping techniques, advise that no winning strategy exists overall, even when considering different volatility regimes, rebalancing frequencies, and protection levels.

Suggested Citation

  • Daniele Mancinelli & Immacolata Oliva, 2023. "Constant or Variable? A Performance Analysis among Portfolio Insurance Strategies," Risks, MDPI, vol. 11(6), pages 1-14, June.
    • Handle: RePEc:gam:jrisks:v:11:y:2023:i:6:p:105-:d:1162993
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    References listed on IDEAS

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    3. Huai-I. Lee & Min-Hsien Chiang & Hsinan Hsu, 2008. "A new choice of dynamic asset management: the variable proportion portfolio insurance," Applied Economics, Taylor & Francis Journals, vol. 40(16), pages 2135-2146.
    4. Gilles Sanfilippo, 2003. "Stocks, bonds and the investment horizon: a test of time diversification on the French market," Quantitative Finance, Taylor & Francis Journals, vol. 3(4), pages 345-351.
    5. Jobson, J D & Korkie, Bob M, 1981. "Performance Hypothesis Testing with the Sharpe and Treynor Measures," Journal of Finance, American Finance Association, vol. 36(4), pages 889-908, September.
    6. Cesari, Riccardo & Cremonini, David, 2003. "Benchmarking, portfolio insurance and technical analysis: a Monte Carlo comparison of dynamic strategies of asset allocation," Journal of Economic Dynamics and Control, Elsevier, vol. 27(6), pages 987-1011, April.
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    Cited by:

    1. Mohammadhossein Vafaeikhah & Amir Abbas Najafi & Fatemeh Rezaei, 2026. "A Multi-Objective Robust Optimization Model for the Portfolio Rebalancing Problem with Constant Proportion Portfolio Insurance Strategy: Evidence from the US Stock Market," Computational Economics, Springer;Society for Computational Economics, vol. 67(5), pages 3687-3728, May.

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