Instruct: Identify the main and secondary category of Arxiv papers based on the titles and abstracts
Query: On Inefficiency of Markowitz-Style Investment Strategies When Drawdown
  is Important   The focal point of this paper is the issue of "drawdown" which arises in
recursive betting scenarios and related applications in the stock market.
Roughly speaking, drawdown is understood to mean drops in wealth over time from
peaks to subsequent lows. Motivated by the fact that this issue is of paramount
concern to conservative investors, we dispense with the classical variance as
the risk metric and work with drawdown and mean return as the risk-reward pair.
In this setting, the main results in this paper address the so-called
"efficiency" of linear time-invariant (LTI) investment feedback strategies
which correspond to Markowitz-style schemes in the finance literature. Our
analysis begins with the following principle which is widely used in finance:
Given two investment opportunities, if one of them has higher risk and lower
return, it will be deemed to be inefficient or strictly dominated and generally
rejected in the marketplace. In this framework, with risk-reward pair as
described above, our main result is that classical Markowitz-style strategies
are inefficient. To establish this, we use a new investment strategy which
involves a time-varying linear feedback block K(k), called the drawdown
modulator. Using this instead of the original LTI feedback block K in the
Markowitz scheme, the desired domination is obtained. As a bonus, it is also
seen that the modulator assures a worst-case level of drawdown protection with
probability one.

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The categories of this paper are: acc-phys
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The categories of this paper are: supr-con
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The categories of this paper are: chem-ph
33
The categories of this paper are: plasm-ph
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The categories of this paper are: nucl-th
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The categories of this paper are: quant-ph
0
The categories of this paper are: hep-ph
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The categories of this paper are: comp-gas
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The categories of this paper are: q-bio
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The categories of this paper are: funct-an
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The categories of this paper are: ao-sci
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The categories of this paper are: bayes-an
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The categories of this paper are: alg-geom
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The categories of this paper are: mtrl-th
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The categories of this paper are: eess
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The categories of this paper are: hep-ex