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When do stop-loss rules stop losses?
KTH.
2014 (English)In: Journal of financial markets, ISSN 1386-4181, E-ISSN 1878-576X, Vol. 18, 234-254 p.Article in journal (Refereed) Published
Abstract [en]

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.

Place, publisher, year, edition, pages
2014. Vol. 18, 234-254 p.
Keyword [en]
Investments, Portfolio management, Risk management, Asset allocation, Performance attribution, Behavioral finance
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:kth:diva-144556DOI: 10.1016/j.finmar.2013.07.001ISI: 000333376600010Scopus ID: 2-s2.0-84897601402OAI: oai:DiVA.org:kth-144556DiVA: diva2:714138
Note

QC 20140425

Available from: 2014-04-25 Created: 2014-04-24 Last updated: 2017-12-05Bibliographically approved

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