Robustness Measure for Portfolio Management Strategy

Abstract

A practical approach to estimating of the investment strategy robustness is presented. As a quantitative measure of robustness, the objective function smoothness degree is proposed for utilization. After the optimization has been conducted, it is essential to utilize an additional criterion for the selection of strategies that possess better robustness property. The utilization of the quantitative estimate of the strategy robustness enables a better strategy to be chosen in the efficiency analysis of investment systems. This strategy is more stable and provides higher return in various stock market conditions, including the sideways trend and downtrend.