The multiple asset performance (MAP) strategy uses option pricing theory to allocate portfolio assets across international equity markets; it does not require any forecasts of expected returns. The return to the MAP portfolio will be the return on the best-performing asset, less a predetermined percentage cost.
Historical simulations over the 1978–87 period indicate that the MAP strategy would have outperformed a world equity index on an annual basis. Furthermore, while Japanese stocks—the best performers over this period—achieved a mean annual return of 26.5 per cent, their returns ranged from –13.7 to 98.2 per cent, with a standard deviation of 29.7 per cent. The MAP strategy—with a mean annual return of 19.4 per cent—captured much of the best performer’s return, and did so with a lower standard deviation (20.2 per cent) and no loss of capital in any year.
