Application of Stochastic Dominance in Stock Preselection

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F17%3A10236535" target="_blank" >RIV/61989100:27510/17:10236535 - isvavai.cz</a>

Výsledek na webu

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DOI - Digital Object Identifier

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Jazyk výsledku

angličtina

Název v původním jazyce

Application of Stochastic Dominance in Stock Preselection

Popis výsledku v původním jazyce

In the paper, we propose to apply stochastic dominance approach as a tool for stock preselection. In the empirical part, we utilize the stock market data, more concretely two datasets consisting of components from two indices: Dow Jones Industrial Average and Standard &amp; Poor’s 500. We compare the out-of-sample performance of the stochastic dominance preselection approach to the performance of rather naive strategy to invest equal fraction of available funds into each stock (1/n strategy). We found out that by applying the first order stochastic dominance we obtain similar results as in the case of 1/n strategy – there is neither significant reduction of the number of preselected stocks nor the difference in return, maximum drawdown or Sharpe ratio. For higher order stochastic dominances there is a significant reduction of preselected stocks quantities and the reduction is greater for larger dataset. However, except DJIA dataset in the case of daily portfolio rebalancing, there is no significant improvement of the performance compared to 1/n strategy – lower drawdowns are compensated by lower returns.

Název v anglickém jazyce

Application of Stochastic Dominance in Stock Preselection

Popis výsledku anglicky

In the paper, we propose to apply stochastic dominance approach as a tool for stock preselection. In the empirical part, we utilize the stock market data, more concretely two datasets consisting of components from two indices: Dow Jones Industrial Average and Standard &amp; Poor’s 500. We compare the out-of-sample performance of the stochastic dominance preselection approach to the performance of rather naive strategy to invest equal fraction of available funds into each stock (1/n strategy). We found out that by applying the first order stochastic dominance we obtain similar results as in the case of 1/n strategy – there is neither significant reduction of the number of preselected stocks nor the difference in return, maximum drawdown or Sharpe ratio. For higher order stochastic dominances there is a significant reduction of preselected stocks quantities and the reduction is greater for larger dataset. However, except DJIA dataset in the case of daily portfolio rebalancing, there is no significant improvement of the performance compared to 1/n strategy – lower drawdowns are compensated by lower returns.

Druh

D - Stať ve sborníku

CEP obor

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OECD FORD obor

50206 - Finance

Projekt

<a href="/cs/project/GA15-23699S" target="_blank" >GA15-23699S: RPF a OT aplikovaná na mezinárodních finančních trzích a problému výběru portfolio</a><br>

Návaznosti

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Rok uplatnění

2017

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název statě ve sborníku

Liberec Economic Forum 2017: proceedings of the 13th international conference : 11th-13th September 2017, Liberec, Czech Republic, EU

ISBN

978-80-7494-349-2

ISSN

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e-ISSN

neuvedeno

Počet stran výsledku

7

Strana od-do

340-346

Název nakladatele

Technical University of Liberec

Místo vydání

Liberec

Místo konání akce

Liberec

Datum konání akce

11. 9. 2017

Typ akce podle státní příslušnosti

EUR - Evropská akce

Kód UT WoS článku

000426486500038