Determining an optimal multiplier in dynamic core-satellite strategies
(2013) The Journal of Asset Management — Vol. 14, n° 4, p. 210-227 (2013)
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- Abstract
- This article investigates the performance of various multiplier techniques in reducing downside risk for dynamic core-satellite portfolios. Using Monte Carlo simulations calibrated on monthly data for three different portfolios. Using Monte Carlo simulations calibrated on monthly data for three different portfolios over a 10-year period, we show that the dynamic IR/TE multiplier offers the best level of capital protection, as the specified floor is violated in less than 1 per cent of the cases. Even though other multipliers might offer higher average excess returns, the IR/TE multiplier still captures a significant fraction of the satellite excess return. In addition, it delivers an almost constant average floor violation rate.
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Caliman, T., D’Hondt, C., & Petitjean, M. (2013). Determining an optimal multiplier in dynamic core-satellite strategies. The Journal of Asset Management, 14(4), 210-227. https://doi.org/10.1057/jam.2013.16 (Original work published 2013)