An empirical analysis of insured portfolio strategies using listed options

Theoretical rationale for the purchase or sale of portfolio insurance has been developed in prior works, but the relative preference structure for insured portfolios has not been examined empirically. This paper provides empirical evidence about performance of insured portfolios constructed from listed put and call options, their underlying stocks, and treasury bills. Efficient portfolios are identified using rules of stochastic dominance and stochastic dominance with a riskless asset from randomly created portfolios. The results illustrate the importance of put and call options to create portfolios containing an insurance component, since insured portfolios represent the majority of dominant assets.