Dynamic Portfolio Management Strategies: A Framework for Historical Analysis

32 Pages Posted: 18 Jul 2018

See all articles by Anthony Seymour

Anthony Seymour

University of Cape Town (UCT)

Emlyn James Flint

Legae Peresec; Department of Actuarial Science, University of Cape Town

Florence Chikurunhe

Peregrine Securities

Date Written: July 16, 2018

Abstract

The performance of dynamic trading and investment strategies can be difficult to predict. Although not without its problems, analysis of the historical performance of a strategy can provide valuable insight into its general risk and return properties. Furthermore, historical analysis allows one to compare variations of a strategy and examine the impact of various parameter choices and implementation rules. Dynamic strategy applications in three areas are considered, namely derivatives, asset allocation and equity factor portfolios.

Firstly, the analysis of a strategy involving single-stock derivatives is examined in which call options on certain constituents of an index portfolio are sold as an alternative method of under-weighting the underlying.

Secondly, the historical performance of an optimization-based asset allocation strategy is considered. The assumed aim of the strategy is to outperform a benchmark of CPI 5 via dynamic trading in a portfolio of domestic equities, bonds, property and cash, as well as international equities and bonds.

Finally, the effects of portfolio construction on factor performance are studied via an historical analysis in which portfolios corresponding to a selection of fundamental factors are managed according to a range of weighting schemes, rebalance frequencies and portfolio sizes.

Keywords: Dynamic trading strategies, backtesting, call options, asset allocation, factor investing

JEL Classification: C01, C02, C21, C22, C31, C32, C51, C52, C53, C61, G12, G13, G14

Suggested Citation

Seymour, Anthony and Flint, Emlyn James and Chikurunhe, Florence, Dynamic Portfolio Management Strategies: A Framework for Historical Analysis (July 16, 2018). Available at SSRN: https://ssrn.com/abstract=3214453 or http://dx.doi.org/10.2139/ssrn.3214453

Anthony Seymour

University of Cape Town (UCT) ( email )

Private Bag X3
Rondebosch, Western Cape 7701
South Africa

Emlyn James Flint (Contact Author)

Legae Peresec ( email )

15 Cavendish Street
Claremont
Cape Town, Western Cape 7700
South Africa
27117227556 (Phone)

HOME PAGE: http://www.legaeperesec.co.za

Department of Actuarial Science, University of Cape Town ( email )

Actuarial Science Section, University of Cape Town
Private Bag X3, Rondebosch
Cape Town, Western Cape 7701
South Africa
+27 21 650 2475 (Phone)

Florence Chikurunhe

Peregrine Securities ( email )

21 Main Road
Claremont
Cape Town, Western Cape 7700
South Africa
+27117227551 (Phone)

HOME PAGE: http://www.peregrine.co.za

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
78
Abstract Views
414
rank
324,319
PlumX Metrics