Long-Run Performance of Dynamic Asset Allocation Strategies

17 Pages Posted: 3 Nov 2015

See all articles by Thomas S Howe

Thomas S Howe

Illinois State University

Ralph Pope

California State University, Sacramento

Date Written: October 31, 2015

Abstract

Perold and Sharpe (1988) present four dynamic strategies which combine investment in stocks with investment in Treasury bills to reduce the risk of equity portfolios. This study uses empirical resampling (historical simulation) to examine the risk and ending wealth of three of these strategies – buy and hold, constant mix, and CPPI. While results are generally consistent with the average proportion of common stock in the portfolio these strategies imply – greater return and risk from a greater proportion of common stock in the portfolio – there are some exceptions. Finally, although the buy and hold strategy places a positive floor on value of the portfolio while the constant mix strategy does not, this makes the buy and hold strategy less risky than the constant mix strategy only in a few limited cases.

Suggested Citation

Howe, Thomas S and Pope, Ralph, Long-Run Performance of Dynamic Asset Allocation Strategies (October 31, 2015). JAFR Vol II, 2014. Available at SSRN: https://ssrn.com/abstract=2684580

Thomas S Howe (Contact Author)

Illinois State University ( email )

Normal, IL 61790
United States

Ralph Pope

California State University, Sacramento ( email )

6000 J Street
Sacramento, CA 95819-6082
United States

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