What does this research mean for the field?

The stationary bootstrap method of Politis and Romano (1994) provides the most accurate and robust simulation for calculating the distribution of maximum drawdown in asset prices, whereas the standard Efron bootstrap systematically underestimates it. Novelty: ClaimNovelty.INCREMENTAL. Consensus alignment: ConsensusAlignment.NEUTRAL.

What question did this study set out to answer?

This research aims to evaluate different bootstrap simulation techniques for estimating maximum drawdown in asset prices.

May 19, 2026Journal of Empirical FinanceOpen Access

Don’t draw the downs apart – How to best simulate asset price drawdowns

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Authors

HDHubert DichtlUniversität Hamburg WDWolfgang DrobetzUniversität Hamburg TOTizian OttoBloomberg (United States)

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Implication

Randomized trial evaluates maximum drawdown estimation techniques in asset prices, suggesting improved accuracy with stationary bootstrap methods.

Key Points

This research aims to evaluate different bootstrap simulation techniques for estimating maximum drawdown in asset prices.
Evaluated multiple bootstrap methods including standard Efron, moving block, and stationary bootstrap.
Used stochastic dominance tests to assess distributional properties of maximum drawdown.
Analyzed performance particularly for long block lengths and large drawdowns.
The standard Efron bootstrap underestimated maximum drawdown, particularly during large drawdowns.
Moving block bootstrap provided reasonable estimates but faced non-stationarity bias.
The stationary bootstrap yielded the most accurate results, advocating for its use in drawdown estimation.

Cite This Study

Dichtl et al. (2026) studied this question.

synapsesocial.com/papers/6a0bfd7a166b51b53d378c87 https://doi.org/10.1016/j.jempfin.2026.101738

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Implication

Randomized trial evaluates maximum drawdown estimation techniques in asset prices, suggesting improved accuracy with stationary bootstrap methods.

Don’t draw the downs apart – How to best simulate asset price drawdowns

Discussion

Member takes

Implication

Key Points

Cite This Study

Don’t draw the downs apart – How to best simulate asset price drawdowns

Discussion

Member takes

Implication

Key Points

Cite This Study

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