RT Journal Article
SR Electronic
T1 On the Efficacy of Stop-Loss Strategies
JF The Journal of Trading
FD Institutional Investor Journals
SP 100
OP 107
DO 10.3905/jot.2014.9.4.100
VO 9
IS 4
A1 Sarah Marietta Tooth
YR 2014
UL https://pm-research.com/content/9/4/100.abstract
AB Standing stop orders, or “stop-losses,” automatically sell out of equity positions to prevent capital losses from exceeding a predetermined threshold. This practice is commonly believed to not only limit downside, but also contribute to long-term portfolio growth. We test this theory by applying stop-losses to the MaxMeasures portfolio selection strategy, and to a bootstrapped backtest of arbitrary strategies on the S&P500 between 1969 and 2012. We find these simplistic stop-losses to be ineffective and generally detrimental to long-term performance.TOPICS: Security analysis and valuation, quantitative methods