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| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Forecasting Optimal Gross Leverage for Long-Short Portfolios |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 58 |
| Date | 2022 |
| Abstract Text | This thesis examines how investors can optimise the level of gross leverage in their portfolios according to arbitrary investment objectives. An approach based on ARIMA modelling is proposed that generalises methods found in existing academic literature. Through regular hyper-parameter selection, this method allows for changing dynamics of optimal shorting limits to reflect different market conditions. Various combinations of hyper-parameter selec-tion methods and objective functions are examined to see the impact on the estimated shorting limits. The results show that the choice of objective func-tion has a major impact on the dynamics of the optimal gross leverage limit, which in turn has a significant impact on portfolio behaviour. The results give a clear indication to the effectiveness of long-only portfolios when comparing various performance metrics. When considering transaction costs, portfolios that have gross leverage limits also see further improvements due to lower portfolio turnover. |
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