Empirical Research of CPPI and TIPP Strategies with Filter Rule

An efficient and disciplined investment strategy which can determine the trend of underlying movement may bring better return to investors. As the global market has been affected by the sub-prime mortgage crisis and the inflation of commodity price, though in long-term view a bull economic growth is expected, the uncertainty, as a shadow in the sunny day, remains. For this situation, an investment strategy which can not only protect principal but also have the exposure to the buoyance of the market finds favour by investors. Constant Proportion Portfolio Insurance Strategy (CPPI) and Time-Invariant Portfolio Protection Strategy (TIPP) are two important portfolio insurance strategies which are popular in financial industry. By dynamically adjusting the allocation of Risk Asses and Reserve Asset in the portfolio, insurance strategy aim to catch the profit and lock the principal at the same time. n this thesis we use filter rule as the judgment of bull/bear trend of the underlying for the CPPI and TIPP strategies. We collect the stock market data of Japan, Hong Kong, Shanghai, Taiwan and Vietnam, by analyzing the practical numbers we try to verify if the CPPI and TIPP strategies can really attain two way advantages by a single move. Also, in this research we try to prove the efficiency of Filter Rule, to show the key factors of making the Portfolio Insurance Strategy and to remind important issues for investors in valuing the performance of insurance strategy.