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Journal Articles Finance Research Letters Year : 2018

Risk-adjusted performance of portfolio insurance and investors’ preferences

Abstract

This paper draws a clear line between investors’ risk preferences and their choice of either Option Based Portfolio Insurance (OBPI) or Constant Proportion Portfolio Insurance (CPPI). For this purpose, OBPI and CPPI are compared using partial-moments-based risk-adjusted performance measures, which are adequate for comparing asymmetric return distributions and can be easily tailored to reflect investors’ preferences. The analysis covers expected utility and prospect utility investors, among others, and the results show investors’ risk preferences in the gain domain are the key determinants of the choice between OBPI and CPPI.
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Dates and versions

hal-02001769 , version 1 (31-01-2019)

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Dima Tawil. Risk-adjusted performance of portfolio insurance and investors’ preferences. Finance Research Letters, 2018, 24, pp.10-18. ⟨10.1016/j.frl.2017.05.004⟩. ⟨hal-02001769⟩
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