Backard/Forward Optimal Combination of Performance Measures for Equity Screening

31 Pages Posted: 12 Jul 2012

See all articles by Monica Billio

Monica Billio

University of Venice - Department of Economics; Ca Foscari University of Venice - Dipartimento di Economia

Massimiliano Caporin

University of Padua - Department of Statistical Sciences

Michele Costola

Ca' Foscari University of Venice

Date Written: July 11, 2012

Abstract

We introduce a novel criterion for performance measure combination designed to be used as an equity screening algorithm. The proposed approach follows the general idea of linearly combining existing performance measures with positive weights and the combination weights are determined by means of an optimization problem. The underlying criterion function takes into account the risk-return trade-off potentially associated with the equity screens, evaluated on a historical and rolling basis. By construction, performance combination weights can vary over time, allowing for changes in preferences across performance measures. An empirical example shows the benefits or our approach compared to naive screening rules based on the Sharpe ratio.

Keywords: performance measures, combining performance measures, portfolio allocation, equity screening, differential evolution

JEL Classification: C44, C58, C61, G11, G17

Suggested Citation

Billio, Monica and Billio, Monica and Caporin, Massimiliano and Costola, Michele, Backard/Forward Optimal Combination of Performance Measures for Equity Screening (July 11, 2012). Available at SSRN: https://ssrn.com/abstract=2104068 or http://dx.doi.org/10.2139/ssrn.2104068

Monica Billio

University of Venice - Department of Economics ( email )

Fondamenta San Giobbe 873
Venezia 30121
Italy
+39 041 234 9170 (Phone)
+39 041 234 9176 (Fax)

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

HOME PAGE: http://www.unive.it/persone/billio

Massimiliano Caporin

University of Padua - Department of Statistical Sciences ( email )

Via Battisti, 241
Padova, 35121
Italy

Michele Costola (Contact Author)

Ca' Foscari University of Venice ( email )

Cannaregio 873
Venice, 30121
Italy

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
94
Abstract Views
1,367
Rank
548,957
PlumX Metrics