Minimizing Shortfall
Journal
Quantitative Finance
ISSN
1469-7688
Type
journal article
Date Issued
2013-01-09
Author(s)
Abstract (De)
This paper describes an empirical study of shortfall optimization using Barra fundamental factors. We compare minimum shortfall to minimum variance portfolios in the US, UK, and Japanese equity markets using Barra Style Factors (Value, Growth, Momentum, etc.). We show that minimizing shortfall generally improves performance over minimizing variance, especially during down-markets, over the period 1985-2010. The outperformance of shortfall is due to intuitive tilts towards protective factors like Value, and away from aggressive factors like Growth and Momentum. The outperformance is largest for the shortfall that measures overall asymmetry rather than the extreme losses.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Quantitative Economic Methods
Refereed
Yes
Publisher
Routledge
Volume
13
Number
10
Subject(s)
Division(s)
Eprints ID
251775
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QF_minimizing_shortfall.pdf
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Format
Adobe PDF
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