Doctoral thesis

Can we outperform simple rule strategies: Evidence from volatility market and optimized bond portfolios

Can technical trading be profitable - evidence from volatility markets: In this paper we research whether look back trading strategies can be pro table in volatility markets over t ...

Author(s) :

Yaacov Kopeliovich, PhD

Professor in Finance at the University of Connecticut, Chief Executive Officer at Kopeliovich Associates (USA)

Abstract :

Can technical trading be profitable - evidence from volatility markets: In this paper we research whether look back trading strategies can be pro table in volatility markets over time. We examine these strategies on VIX time series and short term futures, which trade based on the VIX index. We compare the performance of the technical strategies with a benchmark strategy of buy and hold. We  nd out that technical strategies outperform the benchmark even after applying a power utility with a relative high risk aversion. We conclude that contrary to the equity markets, the pro tability of technical look back strategies, when applied on VIX series, is pronounced even after taking the friction costs into account.

Optimal portfolios of corporate bonds and hold to maturity strategies: In this paper we explore optimal bond portfolios that are held to their maturity. We formulate and solve the problem analytically for log utility investor in the case of one risky corporate asset. We compare the behavior of these portfolios to equal weighted portfolios and document out-performance of the optimal portfolios we constructed. In the second part of the paper we utilize simulation based on Vasicek's Copula approach to derive optimal weights for a corresponding problem involving more than one corporate bond. We discover that these portfolios out-perform naive investment in constant maturity bond indices that have the same maturity horizon. We explain possible application for ALM ( Asset Liability Management) strategies.

Can technical trading be profitable - evidence from volatility markets...
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Optimal portfolios of corporate bonds and hold to maturity strategies...
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Date : 04/11/2014
Thesis Committee :

Supervisor: Jakša Cvitanić, Caltech

External reviewer: Steven Kou, National University of Singapore

Other committee member: René Garcia, EDHEC Business School

 

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