You have backtested the following portfolio strategies: (i) Strategy 1: Equally Weighted (1/N), (ii) Strategy 2: assigning weights inversely proportional to the volatility of each asset, (iii) Strategy 3: assigning weights proportional to the Sharpe Ratio of each asset, (iv) Strategy 4: the Global Minimum Variance optimiser and (v) Strategy 5: the Sharpe Ratio optimiser. Based on the performance evaluation, which of these strategies would you recommend to an institutional investor?

Select one:

a.

A combination of Strategies 1 and 4

b.

Strategy 3

c.

A combination of Strategies 1 and 2

d.

A combination of Strategies 1 and 5

e.

Strategy 2

f.

Strategy 4

g.

Strategy 5

h.

Strategy 1

Strategy 1 Strategy 2 Strategy 3 Strategy 4 Strategy 5 Average 0.050 0.063 0.050 0.089 0.019 Volatility 0.106 0.093 0.107 0.086 0.166 Sharpe 0.474 0.681 0.470 1.039 0.112 Max 0.085 0.069 0.066 0.063 0.088 Min -0.072 -0.069 -0.087 -0.068 -0.285 Cumulative 0.473 0.666 0.470 1.091 0.033 Drawdown 0.179 0.163 0.200 0.110 0.404 Duration 74 66 72 55 94 Profit/Loss 0.842 1.101 0.789 0.996 0.715 Win Rate 0.625 0.596 0.644 0.683 0.606 Expectation 0.151 0.253 0.153 0.363 0.039