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Is Covered Call Investing Wise?: Evaluating the Strategy using Risk-Adjusted Performance Measures

In: Advances In Quantitative Analysis Of Finance And Accounting New Series

Author

Listed:
  • Karyl B. Leggio

    (Bloch School of Business and Public Administration, University of Missouri at Kansas City, Kansas City, Missouri 64110, USA)

  • Donald Lien

    (College of Business, University of Texas at San Antonio, San Antonio, Texas 78249-0631, USA)

Abstract

To evaluate portfolio performance, one needs to consider the risk associated with generating returns. Traditional performance metrics evaluate returns relative to the standard deviation of returns. These moments do not adequately take into account measures of interest to investors. Using improved risk-adjusted performance measures, we find the covered call portfolio is not an adequate investment strategy. Rather, investors are better off by holding the market index.

Suggested Citation

  • Karyl B. Leggio & Donald Lien, 2005. "Is Covered Call Investing Wise?: Evaluating the Strategy using Risk-Adjusted Performance Measures," World Scientific Book Chapters, in: Cheng-Few Lee (ed.), Advances In Quantitative Analysis Of Finance And Accounting New Series, chapter 11, pages 187-204, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812701213_0011
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    Cited by:

    1. Akuzawa, Toshinao & Nishiyama, Yoshihiko, 2013. "Implied Sharpe ratios of portfolios with options: Application to Nikkei futures and listed options," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 335-357.

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