Screening Rules and Portfolio Performance

42 Pages Posted: 6 Mar 2018 Last revised: 3 Jun 2018

See all articles by Angel Leon

Angel Leon

Universidad de Alicante

Lluis Navarro

CaixaBank

Belen Nieto

University of Alicante

Date Written: March 5, 2018

Abstract

We analyze the use of alternative performance measures to rank and select assets. Previous literature centers on the effects of non-normality on rank correlations between orderings. Instead, we select the assets recommended by each performance measure (ordering) and analyze out-of-sample returns of the portfolio that contains them. The overall empirical findings show that performance measures are definitively relevant for subsequent portfolio returns. Assets selected by the Generalized Rachev ratio dominate other selections showing high cumulative returns after the 2008 downturn. The good performance is connected to the fact that these asset returns show high excess kurtosis but positive skewness and are insensitive to the momentum risk factor.

Keywords: Performance Measure, Ranking, Stochastic Dominance, Skewness

JEL Classification: C10, G11, G12

Suggested Citation

Leon, Angel and Navarro, Lluis and Nieto, Belen, Screening Rules and Portfolio Performance (March 5, 2018). Available at SSRN: https://ssrn.com/abstract=3135208 or http://dx.doi.org/10.2139/ssrn.3135208

Angel Leon

Universidad de Alicante ( email )

Campus de San Vicente
Carretera San Vicente del Raspeig
San Vicente del Raspeig, 03690
Spain

Lluis Navarro

CaixaBank ( email )

Diagonal 621
Barcelona, Barcelona
Spain

Belen Nieto (Contact Author)

University of Alicante ( email )

Campus de San Vicente
Carretera San Vicente del Raspeig
San Vicente del Raspeig, Alicante 03690
Spain

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