Trading strategies and Financial Performances: A simulation approach

This paper presents a comparative analysis of three major approaches to portfolio strategies: the maximization of the Sharpe ratio, the minimization of the Expected Shortfall and "zero–intelligence" trading. Data from financial time series and from a simulated order-book are used to analyse how various strategies affect investors' portfolio performance and volatility. Results show, firstly, that the superiority of technical and analytical approaches over a random strategy is not obvious. Secondly, that strategies with lower and less risky profits may reveal preferable to those with higher returns and risk. Balancing this trade-off is crucial for stable financial growth.