Sat, Dec 16, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
New Managers January 2013

Peter Urbani's Statistics - Co-Skewness worth 290bp

This month we look at the impact of different objective functions on the out-of-sample performance of optimised strategy allocations, and in particular of the important contribution of co-skewness to the overall skewness of the portfolio for those who care about higher moments

We show that the inclusion of higher moments to your portfolio construction process is worth +290 bp per annum over and above the performance of a broad Hedge Fund Index (Dow Jones Blue Chip Index). We also show that optimal weights for those who prefer higher odd moments (Mean, Skew etc.) are generally higher in the direction of those assets exhibiting positive relative skewness, or co-skewness, with either a benchmark or the portfolio itself. To illustrate, we conduct out-of-sample back testing on the 10 Main Dow Jones CSFB Blue Chip Hedge Fund Strategy Indices from Jan 2006 to Dec 2012. The initial look-back period is 24 months and rebalancing takes place bi-annually.

Objective functions used include; maximising the Sharpe ratio, which is equivalent to the classical minimum variance portfolio of MarkowitzÃâ‚â„s MPT, Maximising the ratio of the CAGR to both the normal, best fit and modified conditional value at risk (CVaR) or Expected Shortfall. This is sometimes called the STAR Ratio. As a control we compare the results to the benchmark index, and both a buy and hold and rebalanced equally weighted index.

The results show that the Modified and Best Fit methods outperform the Minimum Variance / Maximum Sharpe ratio method, the Benchmark Index and ......................

To view our full article please login

This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.
New Managers
New Managers
New Managers

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Mediobanca acquires majority stakes in Swiss hedge fund[more]

    Komfie Manalo, Opalesque Asia: Listed diversified banking group Mediobanca SpA said it has acquired a majority stake in Geneva-based hedge fund firm RAM Active Investments SA (RAM AI), an active and alternative asset manager offering a range of act

  2. Northleaf Capital Partners closes debut private credit fund on $670M[more]

    Bailey McCann, Opalesque New York: Northleaf Capital Partners has closed its debut private credit fund - Northleaf Private Credit I - on $670 million. The vehicle will invest in private credit transactions in Europe and North America, with a primary focus on lending to private equity-backed compa

  3. ...And Finally - The ongoing gun saga in the U.S.[more]

    From Newsoftheweird.com: As elder members of the First United Methodist Church in Tellico Plains, Tennessee, gathered on Nov. 16 to discuss the recent church shooting in Sutherland Springs, Texas, one of those present asked if anyone had brought a gun to church. One man spoke up and said he c

  4. Opalesque Exclusive: Credit Suisse Asset Management's NEXT Investors leads $6M Series A round for LUX Technology and Services[more]

    Bailey McCann, Opalesque New York: Credit Suisse Asset Management's NEXT Investors has led a $6 million Series A funding round for LUX Technology and Services, a business and technology solutions provider for the alternative assets industry. The investment will be used to fuel growth of Trans

  5. eVestment: hedge funds extend winning streak[more]

    Bailey McCann, Opalesque New York: Hedge funds marked their 13th consecutive month of positive returns in November with +0.47% average returns for the month, according to the latest Hedge Fund Performance Report from eVestment. Activists, long/short and quant equity strategies are producing