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Evaluating Investment Performance: The p-index and Empirical Efficient Frontier

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  • Jing Li
  • Bowei Guo
  • Xinqi Xie
  • Kuo-Ping Chang

Abstract

The empirical results have shown that firstly, with one-week holding period and reinvesting, for SSE Composite Index stocks, the highest p-ratio investment strategy produces the largest annualized rate of return; and for NYSE Composite Index stocks, all the three strategies with both one-week and one-month periods generate negative returns. Secondly, with non-reinvesting, for SSE Composite Index stocks, the highest p-ratio strategy with one-week holding period yields the largest annualized rate of return; and for NYSE Composite stocks, the one-week EEF strategy produces a medium annualized return. Thirdly, under the one-week EEF investment strategy, for NYSE Composite Index stocks, the right frontier yields a higher annualized return, but for SSE Composite Index stocks, the left frontier (stocks on the empirical efficient frontier) yields a higher annualized return than the right frontier. Fourthly, for NYSE Composite Index stocks, there is a positive linear relationship between monthly return and the p-index, but no such relationship is evident for SSE Composite Index stocks. Fifthly, for NYSE Composite Index stocks, the traditional five-factor model performs poorly, and adding the p-index as a sixth factor provides incremental information.

Suggested Citation

  • Jing Li & Bowei Guo & Xinqi Xie & Kuo-Ping Chang, 2025. "Evaluating Investment Performance: The p-index and Empirical Efficient Frontier," Papers 2510.11074, arXiv.org.
    • Handle: RePEc:arx:papers:2510.11074
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    References listed on IDEAS

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