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dc.contributor.author | Gunning, Wade![]() |
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dc.contributor.author | Van Vuuren, Gary![]() |
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dc.date.accessioned | 2021-05-14T13:50:02Z | |
dc.date.available | 2021-05-14T13:50:02Z | |
dc.date.issued | 2020-09 | |
dc.description.abstract | The mean-variance framework coupled with the Sharpe ratio identifies optimal portfolios under the passive investment style. Optimal portfolio identification under active investment approaches, where performance is measured relative to a benchmark, is less well-known. Active portfolios subject to tracking error (TE) constraints lie on distorted elliptical frontiers in return/risk space. Identifying optimal active portfolios, however defined, have only recently begun to be explored. The Ω – ratio considers both down and upside portfolio potential. Recent work has established a technique to determine optimal Ω – ratio portfolios under the passive investment approach. The authors apply the identification of optimal Ω – ratio portfolios to the active arena (i.e., to portfolios constrained by a TE) and find that while passive managers should always invest in maximum Ω – ratio portfolios, active managers should first establish market conditions (which determine the sign of the main axis slope of the constant TE frontier). Maximum Sharpe ratio portfolios should be engaged when this slope is > 0 and maximum Ω – ratios when < 0. | en_ZA |
dc.description.department | Mathematics and Applied Mathematics | en_ZA |
dc.description.librarian | pm2021 | en_ZA |
dc.description.uri | https://businessperspectives.org/journals/investment-management-and-financial-innovations?category_id=30 | en_ZA |
dc.identifier.citation | Wade Gunning and Gary van Vuuren (2020). Optimal omega-ratio portfolio performance constrained by tracking error. Investment Management and Financial Innovations, 17(3), 263-280. doi:10.21511/imfi.17(3).2020.20. | en_ZA |
dc.identifier.issn | 1810-4967 (print) | |
dc.identifier.issn | 1812-9358 (online) | |
dc.identifier.other | 10.21511/imfi.17(3).2020.20 | |
dc.identifier.uri | http://hdl.handle.net/2263/79918 | |
dc.language.iso | en | en_ZA |
dc.publisher | Business Perspectives | en_ZA |
dc.rights | © Wade Gunning, Gary van Vuuren, 2020. This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International license. | en_ZA |
dc.subject | Tracking error | en_ZA |
dc.subject | Ω – ratio | en_ZA |
dc.subject | Optimal portfolio | en_ZA |
dc.title | Optimal omega-ratio portfolio performance constrained by tracking error | en_ZA |
dc.type | Article | en_ZA |