A note on constant proportion trading strategies |
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Authors: | Martin B Haugh |
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Institution: | Department of Industrial Engineering and Operations Research, Columbia University, United States |
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Abstract: | We consider constant proportion (CP) trading strategies when there are multiple underlying securities and use a recently derived expression for the terminal wealth of a CP strategy to address two issues. First, we characterize the performance of a CP strategy relative to the performance of the corresponding buy-and-hold strategy. We then explain the performance of leveraged ETFs which have been criticized for not performing as expected, particularly during the financial crisis of 2008. |
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Keywords: | Constant proportion trading strategy Leveraged ETF |
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