EAN: 9783941482210

PERFORMANCE OF 130 30 STRATEGIES - SEBASTIAN RI...

One of the latest innovations in asset management that has rapidly increased in popularity in
recent years is the so-called 130 30 strategy . Through a combination of leverage and short
selling this strategy enables portfolio managers to underweight unattractive securities to a
much bigger extent than it is possible with long-only portfolios. This book analyzes the
performance of 130 30 and other active extension portfolios that are built according to a
quantitative security selection model using typical value fundamentals  such as the dividend
yield or the price-to-earnings ratio. In comparison to the benchmark and traditional long-only
portfolios the 130 30 strategy does outperform the former two over a 15-year time period from
1993 to early 2008  even after accounting for costs. When analyzing the risk-adjusted returns
in more detail it becomes obvious that a 130 30 strategy is an especially promising alternative
to passive or active long-only investment strategies in rather weak market phases as they were
present during the early years of this decade. That is why a dynamic strategy that switches
between 130 30  long-only and index depending on the respective market phase is analyzed as
well. When using for example an autoregressive model to select the appropriate strategy such a
dynamic approach delivers significantly higher returns than a static active extension portfolio
does.

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