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Journal Articles Quantitative Finance Year : 2018

Challenging the robustness of optimal portfolio investment with moving average-based strategies

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Abstract

The aim of this paper is to compare the performance of a theoretically optimal portfolio with that of a moving average-based strategy in the presence of parameter misspecification. The setting we consider is that of a stochastic asset price model where the trend follows an unobservable Ornstein–Uhlenbeck process. For both strategies, we provide the asymptotic expectation of the logarithmic return as a function of the model parameters. Then, numerical examples are given, showing that an investment strategy using a moving average crossover rule is more robust than the optimal strategy under parameter misspecification.
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Dates and versions

hal-02527992 , version 1 (01-04-2020)

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Ahmed Bel Hadj Ayed, Grégoire Loeper, Frédéric Abergel. Challenging the robustness of optimal portfolio investment with moving average-based strategies. Quantitative Finance, 2018, 19 (1), pp.123-135. ⟨10.1080/14697688.2018.1468080⟩. ⟨hal-02527992⟩
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