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

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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Submitted on : Wednesday, April 1, 2020 - 3:40:58 PM
Last modification on : Saturday, May 1, 2021 - 3:51:21 AM

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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, Taylor & Francis (Routledge), 2018, 19 (1), pp.123-135. ⟨10.1080/14697688.2018.1468080⟩. ⟨hal-02527992⟩

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