Performance Evaluation of Zero Net-Investment Strategies / Òscar Jordà, Alan M. Taylor.

Format:

Book

Author/Creator:

Jordà, Òscar.

Contributor:

National Bureau of Economic Research.

Taylor, Alan M.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17150.

NBER working paper series no. w17150

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

This paper introduces new nonparametric statistical methods to evaluate zero-cost investment strategies. We focus on directional trading strategies, risk-adjusted returns, and the investor's decisions under uncertainty as the core of our analysis. By relying on classification tools with a long tradition in the sciences and biostatistics, we can provide a tighter connection between model-based risk characteristics and the no-arbitrage conditions for market efficiency. Moreover, we extend the methods to multicategorical settings, such as when the investor can sometimes take a neutral position. A variety of inferential procedures are provided, many of which are illustrated with applications to excess equity returns and to currency carry trades.

Notes:

Print version record

June 2011.