# Comparing two portfolio construction strategies

Suppose that I have two long-only portfolio construction strategies and that I backtest both of them on the same data. If I wanted to find out whether one of these methods would have outperformed the market, then I would regress the resulting excess returns of that method against the excess returns of the market and look at Jensen's alpha.

How would I compare (using econometric methods) whether one strategy outperforms the other? Would it make sense to regress one against the other and test whether the intercept is different from $0$?

• The problem with regressing one strategy against the other is that the results are not symmetric if you reverse the strategies. So I don't recommend that method. I prefer comparing both against the market and seeing which outperforms the market more (and is the difference significant). – noob2 Sep 6 '16 at 16:35
• @noob2 So running a regression of the return of one method excess the other against the market excess the risk free asset and testing whether that intercept is positive would be justifiable? – Calculon Sep 6 '16 at 16:42
• Seems OK, but I let's see first what answers other people come up with. – noob2 Sep 6 '16 at 17:29