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Bertrand
Philippe Bertrand
Membre affilié
,
Aix-Marseille Université
,
Institut d'administration des entreprises (IAE)
Statut
Professeur des universités
Domaine(s) de recherche
Finance
Contact
philippe.bertrand[at]univ-amu.fr
+33(0)4 13 55 25 28
Adresse
Îlot Bernard du Bois
Publications
We analyze the performance of the two main portfolio insurance methods, the OBPI and CPPI strategies, using downside risk measures. For this purpose, we introduce Kappa performance measures and especially the Omega measure. These measures take account of the entire return distribution. We show that the CPPI method performs better than the OBPI. As a-by-product, we determine the set of threshold values for these risk/reward performance measures.
Research has shown that adding constraints to total portfolio volatility can substantially improve the performance of managed portfolios. Although other work has considered constant tracking-error volatility frontiers, in this study tracking error was allowed to vary but the risk aversion was fixed. The resulting optimal portfolios have several desirable properties.
In a recent paper, Lo (2002) derives the asymptotic distribution of the Sharpe ratio under several sets of assumptions for the return-generating process. In thi
This paper examines some properties of portfolio insurance that are linked to the risk aversion and the prudence of the investor. We provide explicit conditions to measure portfolio sensitivity to downside risk. We also characterize the degree of portfolio insurance by means of the ratio of absolute prudence to absolute risk aversion.
This paper examines whether the risk-adjusted performance attribution process is consistent with portfolio optimisation under tracking-error constraints. Since Mina (2003), Bertrand (2005, 2008b) and Menchero and Hu (2006), risk attribution has been widely used in the performance attribution process. This paper analyses and discusses the information ratio decomposition proposed by Menchero (2007) in the light of the analysis of risk-adjusted performance attribution developed by Bertrand (2005). It is also shown that only optimisation under the tracking-error constraint alone is consistent with the risk-adjusted performance attribution process. Indeed, as soon as additional constraints (for example, on total risk) are introduced, the component information ratios of the decisions are no longer the same or equal to the information ratio of the whole portfolio. This means that no equilibrium between expected return and relative risk has been reached.
Performance measures such as the Sharpe ratio and the information ratio are estimation subject to estimation error. Lo (2002) derives the explicit expressions for the statistical distribution of the Sharpe ratio. Bertrand and Protopopescu (2007) have extended his work to the bivariate case which corresponds to the Information ratio. In the present paper, we analyze the effects of skewness and kurtosis of portfolio and benchmark returns on the precision of the estimation of the Sharpe ratio and of the information ratio. We show that these effects are in line with what decision theory suggests about preferences of investors about skewness and kurtosis. Moreover, these effects are significant and can disturb the performance evaluation process if they are neglected.
This paper examines wether risk attribution process is consistent with portfolio optimizations under tracking-error constraints. Since Mina (2003), Bertrand (2005) and Menchero and Hu (2006), risk attribution has been widely used in the performance attribution process. This article presents an extension of our previous work on risk attribution to others portfolio optimization contexts. It is shown that only optimization under the tracking-error constraint alone is consistent with the risk attribution process. Indeed, as soon as additional constraints (e.g. on total risk) are introduced, the risk attribution method conflicts with the performance attribution process, preventing us from legitimating all the optimal decisions taken by a portfolio manager.
Découvrez le livre Gestion de portefeuille : analyse quantitative et gestion structurée, 2e éd. BERTRAND Philippe, PRIGENT Jean-Luc disponible dans la collection Finance de l'éditeur de livres
