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PERFORMANCE OF PORTFOLIO INSURANCE STRATEGIES: EVIDENCE FROM TURKEY

Year 2009, Volume: 1 Issue: 2, 35 - 44, 01.12.2009

Hakan Er Hande Erdogan Aktan

Abstract

In this study, we compare the performances of the two standard portfolio insurance methods: the
Option Based Portfolio Insurance (OBPI) and the Constant Proportion Portfolio Insurance (CPPI).
In prior works, data on many established markets were utilised to investigate this issue. There have
also been many empirical studies of portfolio insurance (PI) utilising emerging market data.
However, we are not aware of an application PI on Turkish data. This is where our study
contributes to PI literature. We use a data set that covers the Istanbul Stock Exchange 30 (ISE-30)
stocks, from 1.3.1997 to 29.8.2008. Our main finding is that the implementation of PI (especially
CPPI) enhances portfolio performance.

Keywords

Option Based Portfolio Insurance (OBPI) Constant Proportion Portfolio Insurance (CPPI) Emerging Markets

References

  • Annaert, J., Osselaer, S. V., & Verstraete, B. (2009). “Performance evaluation of portfolio insurance strategies using stochastic dominance criteria”. Journal of Banking and Finance, Vol.33(2), pp.272−280
  • Bertrand, P., & Prigent, J. L. (2005), “Portfolio insurance strategies: OBPI versus CPPI”, Finance, Vol. 26(1), pp.5−32.
  • Black. F and Jones,R, (1987), “Simplifying portfolio insurance”, Journal of Portfolio
  • Management Vol.14, No.1 , pp. 48–51. Black, F. and Rouhani, R. (1989). “Constant proportion portfolio insurance and the synthetic put option: a comparison”, in Institutional Investor Focus on Investment Management, edited by Frank
  • J. Fabozzi. Cambridge, Mass: Ballinger, pp.695–708. Black, F. and Perold, A.F. (1992), “Theory of constant proportion portfolio insurance”, Journal of
  • Economic Dynamics and Control Vol.16, pp. 403–426. Black, F. and Scholes, M. S. (1973). “The pricing of options and corporate liabilities.” Journal of
  • Political Economy, Vol.81, pp.637 –654. Bookstaber, R. and Langsam, J. A. (2000). “Portfolio insurance trading rules”,The Journal of
  • Futures Markets, Vol.8, pp.15–31. Do, B.H. (2002), “Relative performance of dynamic portfolio insurance strategies: Australian evidence”, Accounting & Finance, Vol. 42, No. 3, pp. 279-296.
  • Garcia, C.B. and Gould, F.J. (1987), “An empirical study of portfolio insurance”, Financial
  • Analysts Journal Vol. 43, pp. 44–54. Leamer, E. E. (1983), “Let's take the con out of econometrics”, AmericanEconomic Review, Vol. , pp. 31-43.
  • Leland, H.E and Rubinstein, M. (1976), “The evolution of portfolio insurance”. In: D.L. Luskin,
  • Editor, Portfolio insurance: A guide to dynamic hedging, Wiley Lo, A. and MacKinlay, G. (1990), “Data snooping biases in tests of financial asset pricing models”, Review of Financial Studies, Vol.3, pp. 431-467.
  • Merrick, J. (1988), “Portfolio Insurance with Stock Index Futures”, Journal of Futures Markets” Vol.8, No. 4, pp. 441–455.
  • Perold, A. (1986). “Constant portfolio insurance”, Harvard Business School. Unpublished manuscript.
  • Perold, A. and Sharpe, W. (1988). “Dynamic strategies for asset allocation” Financial Analyst Journal, Vol. 44, pp.16–27.
  • Jacobs, B., (1983), “The portfolio insurance puzzle”, Pension & Investment Age, August 22.
  • İstanbul Exchange (2009), İstanbul Menkul kıymet borsası, www. imkb.gov.tr

Year 2009, Volume: 1 Issue: 2, 35 - 44, 01.12.2009

Hakan Er Hande Erdogan Aktan

Abstract

References

  • Annaert, J., Osselaer, S. V., & Verstraete, B. (2009). “Performance evaluation of portfolio insurance strategies using stochastic dominance criteria”. Journal of Banking and Finance, Vol.33(2), pp.272−280
  • Bertrand, P., & Prigent, J. L. (2005), “Portfolio insurance strategies: OBPI versus CPPI”, Finance, Vol. 26(1), pp.5−32.
  • Black. F and Jones,R, (1987), “Simplifying portfolio insurance”, Journal of Portfolio
  • Management Vol.14, No.1 , pp. 48–51. Black, F. and Rouhani, R. (1989). “Constant proportion portfolio insurance and the synthetic put option: a comparison”, in Institutional Investor Focus on Investment Management, edited by Frank
  • J. Fabozzi. Cambridge, Mass: Ballinger, pp.695–708. Black, F. and Perold, A.F. (1992), “Theory of constant proportion portfolio insurance”, Journal of
  • Economic Dynamics and Control Vol.16, pp. 403–426. Black, F. and Scholes, M. S. (1973). “The pricing of options and corporate liabilities.” Journal of
  • Political Economy, Vol.81, pp.637 –654. Bookstaber, R. and Langsam, J. A. (2000). “Portfolio insurance trading rules”,The Journal of
  • Futures Markets, Vol.8, pp.15–31. Do, B.H. (2002), “Relative performance of dynamic portfolio insurance strategies: Australian evidence”, Accounting & Finance, Vol. 42, No. 3, pp. 279-296.
  • Garcia, C.B. and Gould, F.J. (1987), “An empirical study of portfolio insurance”, Financial
  • Analysts Journal Vol. 43, pp. 44–54. Leamer, E. E. (1983), “Let's take the con out of econometrics”, AmericanEconomic Review, Vol. , pp. 31-43.
  • Leland, H.E and Rubinstein, M. (1976), “The evolution of portfolio insurance”. In: D.L. Luskin,
  • Editor, Portfolio insurance: A guide to dynamic hedging, Wiley Lo, A. and MacKinlay, G. (1990), “Data snooping biases in tests of financial asset pricing models”, Review of Financial Studies, Vol.3, pp. 431-467.
  • Merrick, J. (1988), “Portfolio Insurance with Stock Index Futures”, Journal of Futures Markets” Vol.8, No. 4, pp. 441–455.
  • Perold, A. (1986). “Constant portfolio insurance”, Harvard Business School. Unpublished manuscript.
  • Perold, A. and Sharpe, W. (1988). “Dynamic strategies for asset allocation” Financial Analyst Journal, Vol. 44, pp.16–27.
  • Jacobs, B., (1983), “The portfolio insurance puzzle”, Pension & Investment Age, August 22.
  • İstanbul Exchange (2009), İstanbul Menkul kıymet borsası, www. imkb.gov.tr
There are 17 citations in total.

Details

Other ID JA44BA57EY
Journal Section Articles
Authors

Hakan Er This is me

Hande Erdogan Aktan This is me

Publication Date December 1, 2009
Published in Issue Year 2009 Volume: 1 Issue: 2

Cite

APA Er, H., & Erdogan Aktan, H. (2009). PERFORMANCE OF PORTFOLIO INSURANCE STRATEGIES: EVIDENCE FROM TURKEY. International Journal of Economics and Finance Studies, 1(2), 35-44.
AMA Er H, Erdogan Aktan H. PERFORMANCE OF PORTFOLIO INSURANCE STRATEGIES: EVIDENCE FROM TURKEY. IJEFS. December 2009;1(2):35-44.
Chicago Er, Hakan, and Hande Erdogan Aktan. “PERFORMANCE OF PORTFOLIO INSURANCE STRATEGIES: EVIDENCE FROM TURKEY”. International Journal of Economics and Finance Studies 1, no. 2 (December 2009): 35-44.
EndNote Er H, Erdogan Aktan H (December 1, 2009) PERFORMANCE OF PORTFOLIO INSURANCE STRATEGIES: EVIDENCE FROM TURKEY. International Journal of Economics and Finance Studies 1 2 35–44.
IEEE H. Er and H. Erdogan Aktan, “PERFORMANCE OF PORTFOLIO INSURANCE STRATEGIES: EVIDENCE FROM TURKEY”, IJEFS, vol. 1, no. 2, pp. 35–44, 2009.
ISNAD Er, Hakan - Erdogan Aktan, Hande. “PERFORMANCE OF PORTFOLIO INSURANCE STRATEGIES: EVIDENCE FROM TURKEY”. International Journal of Economics and Finance Studies 1/2 (December 2009), 35-44.
JAMA Er H, Erdogan Aktan H. PERFORMANCE OF PORTFOLIO INSURANCE STRATEGIES: EVIDENCE FROM TURKEY. IJEFS. 2009;1:35–44.
MLA Er, Hakan and Hande Erdogan Aktan. “PERFORMANCE OF PORTFOLIO INSURANCE STRATEGIES: EVIDENCE FROM TURKEY”. International Journal of Economics and Finance Studies, vol. 1, no. 2, 2009, pp. 35-44.
Vancouver Er H, Erdogan Aktan H. PERFORMANCE OF PORTFOLIO INSURANCE STRATEGIES: EVIDENCE FROM TURKEY. IJEFS. 2009;1(2):35-44.