Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
960868 | Journal of Financial Markets | 2014 | 21 Pages |
Abstract
We propose a simple analytical framework to measure the value added or subtracted by stop-loss rules-predetermined policies that reduce a portfolio's exposure after reaching a certain threshold of cumulative losses-on the expected return and volatility of an arbitrary portfolio strategy. Using daily futures price data, we provide an empirical analysis of stop-loss policies applied to a buy-and-hold strategy using index futures contracts. At longer sampling frequencies, certain stop-loss policies can increase expected return while substantially reducing volatility, consistent with their objectives in practical applications.
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Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Kathryn M. Kaminski, Andrew W. Lo,