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Trading strategies and Financial Performances: A simulation approach

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  • Biondo, Alessio Emanuele
  • Mazzarino, Laura
  • Pluchino, Alessandro

Abstract

This paper presents a comparative analysis of three major approaches to portfolio strategies: the maximization of the Sharpe ratio, the minimization of the Expected Shortfall and “zero–intelligence” trading. Data from financial time series and from a simulated order-book are used to analyse how various strategies affect investors’ portfolio performance and volatility. Results show, firstly, that the superiority of technical and analytical approaches over a random strategy is not obvious. Secondly, that strategies with lower and less risky profits may reveal preferable to those with higher returns and risk. Balancing this trade-off is crucial for stable financial growth.

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  • Biondo, Alessio Emanuele & Mazzarino, Laura & Pluchino, Alessandro, 2024. "Trading strategies and Financial Performances: A simulation approach," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    • Handle: RePEc:eee:finana:v:95:y:2024:i:pb:s1057521924003582
    DOI: 10.1016/j.irfa.2024.103426
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    More about this item

    Keywords

    Sharpe ratio; Expected Shortfall; Portfolio performance; Order-book; Simulations;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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