Quantifying the Maximum Worth of Portfolio Management in a Multi-Period Setting

34 Pages Posted: 5 Mar 2019

See all articles by David Edelman

David Edelman

University College Dublin

Ekaterina Goryagina

University College Dublin (UCD) - Department of Banking & Finance

Date Written: January 2019

Abstract

In this paper we present an approach to quantify the maximum worth of active portfolio management in a multi-period setting. This methodology estimates a hindsight upper bound on active management fees. The methodology is demonstrated in an empirical study for the Energy industry. In this study the BHCM derivative instrument considerably outperforms all other investment opportunities considered, net of management fees. The dominance of the BHCM derivative, net of management fees, is potentially sufficient to offset other investment and trading expenses. This suggests that the BHCM derivative could in fact be the optimal choice for the investor, rather than standard active or passive funds.

Suggested Citation

Edelman, David and Goryagina, Ekaterina, Quantifying the Maximum Worth of Portfolio Management in a Multi-Period Setting (January 2019). Available at SSRN: https://ssrn.com/abstract=3330625 or http://dx.doi.org/10.2139/ssrn.3330625

David Edelman

University College Dublin ( email )

Belfield
Belfield, Dublin 4 4
Ireland

Ekaterina Goryagina (Contact Author)

University College Dublin (UCD) - Department of Banking & Finance ( email )

Blackrock, Co. Dublin
Ireland

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