TY  - JOUR
AU  - Jordà,Òscar
AU  - Taylor,Alan M.
TI  - Performance Evaluation of Zero Net-Investment Strategies
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17150
PY  - 2011
Y2  - June 2011
UR  - http://www.nber.org/papers/w17150
L1  - http://www.nber.org/papers/w17150.pdf
N1  - Author contact info:
Òscar Jorda
Economic Research, MS 1130
Federal Reserve Bank of San Francisco
101 Market St.
San Francisco, CA 94105
E-Mail: oscar.jorda@sf.frb.org

Alan M. Taylor
Department of Economics
University of Virginia
Monroe Hall
Charlottesville, VA 22903
Fax: (434) 982-2904
E-Mail: alan.m.taylor@virginia.edu
AB  - This paper introduces new nonparametric statistical methods to evaluate zero-cost investment strategies. We focus on directional trading strategies, risk-adjusted returns, and the investor’s decisions under uncertainty as the core of our analysis. By relying on classification tools with a long tradition in the sciences and biostatistics, we can provide a tighter connection between model-based risk characteristics and the no-arbitrage conditions for market efficiency. Moreover, we extend the methods to multicategorical settings, such as when the investor can sometimes take a neutral position. A variety of inferential procedures are provided, many of which are illustrated with applications to excess equity returns and to currency carry trades.
ER  -