{"title":"Is the omega ratio a good portfolio optimization criterion?","authors":"Ángel Samaniego Alcántar","doi":"10.22201/fca.24488410e.2023.3432","DOIUrl":null,"url":null,"abstract":"<div class=\"page\" title=\"Page 1\"><div class=\"section\"><div class=\"layoutArea\"><div class=\"column\"><p class=\"Cuerpo\">The Omega ratio has been widely used in the literature to optimize and search for good performance in investment portfolios. It considers both the downside and upside potential of the portfolio with respect to a predetermined threshold, which can be fixed or time varying. Mixed results have been obtained in different markets and periods. And when combined with other performance or risk measures, its results can be improved. The proposed model restricts the omega ratio to a value of less than 470, a maximum investment in each asset of 15%, with a target annual return equal to the return of the Dow Jones Industrial Average (DJIA) among the assets that make up the index. In the study period (2000-2020, rolling window with annual return per day) there is a 64% probability of outperforming the DJIA with an appraisal of 2.36, higher than the other models used (Upside potential, Downside potential, semi-variance and unconstrained Omega).</p></div></div></div></div>","PeriodicalId":52100,"journal":{"name":"Contaduria y Administracion","volume":null,"pages":null},"PeriodicalIF":0.0000,"publicationDate":"2022-10-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Contaduria y Administracion","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.22201/fca.24488410e.2023.3432","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"Business, Management and Accounting","Score":null,"Total":0}
引用次数: 0
Abstract
The Omega ratio has been widely used in the literature to optimize and search for good performance in investment portfolios. It considers both the downside and upside potential of the portfolio with respect to a predetermined threshold, which can be fixed or time varying. Mixed results have been obtained in different markets and periods. And when combined with other performance or risk measures, its results can be improved. The proposed model restricts the omega ratio to a value of less than 470, a maximum investment in each asset of 15%, with a target annual return equal to the return of the Dow Jones Industrial Average (DJIA) among the assets that make up the index. In the study period (2000-2020, rolling window with annual return per day) there is a 64% probability of outperforming the DJIA with an appraisal of 2.36, higher than the other models used (Upside potential, Downside potential, semi-variance and unconstrained Omega).
期刊介绍：
Contaduría y Administración (Accounting and Management)is a quarterly journal aimed to the academic community. Being peer-reviewed by double blind process,seeks to contribute to the advancement of scientific and technical knowledge in the financial and administrative disciplines. This journal publishes original theoretical or applied research (No case studies, descriptive and exploratory) in Spanish and English on the following subjects: • Organization Management • Production Management and Operations • Human Resources Management • Management of Information Technology • Accounting and Auditing • Management and Leadership • Business Economics • Entrepreneurship • Business Environment • Finance • Operations Research • Innovation and Technological Change in Organizations • Marketing • Micro, Small and Medium Enterprises • Planning and Business Strategies • Management Theory • Financial Theory • Business Decisions Contaduría y Administración (Accounting and Management) also receives research papers on related areas to the above mentioned.
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