A Note on the Impact of Non Linear Reward and Risk Measures

In this note, we examine the impact of non linear reward and risk measures on portfolio selection. In particular, we compare the ex-post …nal wealth sample paths of strategies based on the Sharpe ratio and strategies based on non-linear reward/risk measures. As suggested by the recent literature, we model dependencies with an asymmetric t copula estimated on the innovations of the marginals that follow an ARMA-GARCH type model. Therefore, we …rst simulate future scenarios, on the basis of which allocation decisions are made, and then we compare the ex-post …nal wealth obtained with non-linear risk and reward strategies and the wealth obtained with classic portfolio strategies .