A Strategy Considering Both Magnitude and Duration of Drawdown

Drawdown is one of the most important measures to evaluate the risk of a portfolio. However, when it comes to the drawdown measure, the scholar’s concern more about the magnitude than the duration of the drawdown. For examples, there are various indicators of drawdown measures including the maximum drawdown, Conditional Drawdown-at-Risk (CDaR), etc. Most of them evaluate the magnitude of drawdown. In this paper, a strategy is built considering both the magnitude and duration of drawdown. Using the historical average maximum drawdown duration as the condition of filtering assets, this paper improves the strategy without considering the duration of the drawdown by leading an empirical analysis.