• To verify the effectiveness of a certain asset allocation strategy, how long a time horizon should be?
  • Is there any academic paper regarding this topic?

Question in more detial

  • I know that appropriate time horizon varies depending on investment strategy. For example, high frequency trading (HFT) needs less than a second to prove its effectiveness.
  • The appropriate time horizon that I am curios to know is for 'portfolio investment', which is asset allocation.
  • If I want to argue that a certain portfolio optimization strategy is better than others, how long time horizon do I need?
  • $\begingroup$ Your reference to trading frequency is likely a big part of it, but I'd start first by defining 'effectiveness' in your case $\endgroup$ – Chris Oct 3 '19 at 16:54
  • $\begingroup$ @Chris 'effectiveness' of an investment strategy is, in my book, a perforance indicator showing how good a portfolio strategy is. For example, sharpe ratio and sortino ratio can be used to show the effectiveness of an investment strategy. $\endgroup$ – Eiffelbear Oct 3 '19 at 20:40
  • $\begingroup$ @Chris So we can put the question in other words as follows : To argue one certain portfolio performance measurement (ex. Sharpe ratio) of a certain asset allocation is valid, how long the investment horizon should be? $\endgroup$ – Eiffelbear Oct 3 '19 at 20:42
  • 1
    $\begingroup$ well, Sharpe ratio follows a Student's t distribution...seems like you could use this information to assess a given value's statistical significance at some level. $\endgroup$ – Chris Oct 3 '19 at 23:42

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