9/8/2023 0 Comments Maximum drawdown period![]() ![]() To the extent that you rely on the Information in connection with any investment decision, you do so at your own risk. You are cautioned against using this Information as the basis for making a decision to purchase any financial product. This Information does not constitute an offer to sell, or a solicitation of an offer to buy, any financial product, and may not be relied upon in connection with the purchase or sale of any financial product. The services to which the Information relate are NOT FOR RETAIL CLIENTS - The information contained in the Website is solely intended for professional investors, defined as investors which (1) qualify as professional clients within the meaning of the Markets in Financial Instruments Directive (MiFID), (2) have requested to be treated as professional clients within the meaning of the MiFID or (3) are authorized to receive such information under any other applicable laws and must not be relied or acted upon by any other persons. Important information This disclaimer applies to any documents and the verbal or written comments of any person in presentations or webinars on this website and taken together is referred to herein as the “Information”. ![]() We use maximum drawdown as one of the key statistics for evaluating our quantitative investment strategies and for deciding on the introduction of new variables in our models. Most investors would strongly prefer the first strategy, because it has a much lower maximum drawdown than the second strategy! Furthermore, the length of the drawdown period is shorter. ![]() However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.įor example: two strategies can have the same average outperformance, tracking error, information ratio and volatility, but their maximum drawdowns compared to the benchmark can be very different.įor instance, suppose that the first one achieves a monthly performance of 1%, -0.5%, 1%, -0.5% and so on versus the benchmark, while the second strategy achieve an outperformance of 1% each month during the first half of the sample, but an underperformance of 0.5% each month during the second half of the sample. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. ![]() It is usually quoted as a percentage of the peak value. We use maximum drawdown as one of the key statistics for evaluating our quantitative investment strategies and for deciding on the introduction of new variables in our models.Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. ![]()
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