Download This PaperDo Stop-loss Rules Add Value in International Equity Market Allocation?
31 Pages Posted: 29 Sep 2020 Last revised: 17 Dec 2020
Date Written: July 15, 2020
Abstract
We consider the performance of stop-loss rules in international equity market allocation. Our results indicate that stop-loss rules, which involve closing positions that decline by a pre-specified percentage, are important determinants in the parametric portfolio policy. They generate portfolios that have superior mean and risk-adjusted returns for investors. This result holds in general but is economically stronger in declining markets. The out-performance is robust to the inclusion of transaction costs.
Keywords: Asset Allocation, Stop-Loss Rule
JEL Classification: G11, G12
Suggested Citation: Suggested Citation
Dai, Bochuan and Marshall, Ben R. and Nguyen, Nhut H. and Visaltanachoti, Nuttawat, Do Stop-loss Rules Add Value in International Equity Market Allocation? (July 15, 2020). Available at SSRN: https://ssrn.com/abstract=3657303 or http://dx.doi.org/10.2139/ssrn.3657303
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