Minimizing Shortfall
Quantitative Finance, Forthcoming
21 Pages Posted: 3 Feb 2011 Last revised: 22 Sep 2016
Date Written: January 26, 2013
Abstract
This paper describes an empirical study of shortfall optimization with Barra Extreme Risk. 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
Keywords: empirical study, shortfall, optimization, Barra, Extreme Risk minimum, shortfall minimum, variance portfolios, US, UK, Japanese equity markets, Barra, Style Factors, Value Growth Momentum measures overall asymmetry
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Beyond Value at Risk: Forecasting Portfolio Loss at Multiple Horizons
By Lisa R. Goldberg, Guy Miller, ...
-
Maxvar: Long Horizon Value at Risk in a Mark-to-Market Environment
By Jacob Boudoukh, Richard Stanton, ...
-
Evaluating Risk Forecasts with Central Limits
By Angelo Barbieri, Vladislav Dubikovsky, ...
-
Extreme Risk Analysis, July 2009
By Lisa R. Goldberg, Michael Y. Hayes, ...
-
By Lisa R. Goldberg, Michael Y. Hayes, ...
-
Central Limits and Financial Risk
By Angelo Barbieri, Vladislav Dubikovsky, ...
-
Understanding the Tails of the Return Distribution
By Msci Inc.
-
The Long View of Financial Risk
By Lisa R. Goldberg and Michael Y. Hayes
-
The Long View of Financial Risk, August 2009
By Lisa R. Goldberg and Michael Y. Hayes