Dynamic portfolio insurance strategies during the financial crisis

During the financial crisis, the prices at the stock exchanges around the world were plummeting. Many people lost a fortune, partially also because of the lack of insurance applied to the portfolios. However, because of these large losses incurred, the notion for capital protection in investments found a revival. The goal of this thesis is to find out, whether the existing dynamic portfolio insurance strategies would have worked under the extreme stock market conditions of the year 2008, where the effects of the financial crisis peaked. After a theoretical analysis of the chosen portfolio insurance strategies, the second part of the thesis consists of the empirical analysis of the different strategies according to the market data of 2008. The strategies chosen for examination were Constant Proportion Portfolio Insurance, Time Invariant Portfolio Protection, Modified Time Invariant Portfolio Protection, Constant-Mix, and Modified Stop-Loss Strategy. All these strategies were tested according to the stock indices DAX, DJIA, and Nikkei225. The results where compared with the results of the static Buy and Hold Strategy in order to measure the success of the dynamic strategies.

Autorentext

Stefan Schuster discovered his passion for the financial markets already in his teenager years. He finished commercial school in Baden (investments) and acquired his Master Degree in "Banking and Finance" at the University of applied sciences bfi Wien. He founded "veranlagung.net" in 2015 with the goal of providing high quality financial advisory.