Chapter 6 The portfolio distribution of directional strategies

EMMANUEL. ACAR

STEPHEN. STEPHEN

6.1 INTRODUCTION

This chapter is concerned with the rates of returns distribution generated by a set of dynamic strategies. In order to calculate the risk of a portfolio, a passive investor applying buy-and-hold strategies needs to know how related are the two underlying markets. This information is necessary for an active investor but not sufficient alone. The active investor also needs to know how the two forecasting strategies he or she follows can differ. Very little is known about the exact distribution of portfolio of active strategies. Active strategies differ from passive ones in that they include an in-built timing. Market timing affects ...

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