A lot of 'underperforming' investment strategies are actually more efficient than the market if you factor in how much time you're actually at risk.
SSRN · March 17, 2026 · 6292699
The Takeaway
We usually judge a stock strategy by its total annual return, but this paper argues we should judge it by 'return per day of risk.' By this metric, simple strategies like the 200-day moving average actually beat the 'buy-and-hold' market because they achieve similar safety while leaving your money free to be used elsewhere 30% of the time.
From the abstract
Standard risk-adjusted performance measures-Sharpe ratio, MAR ratio, information ratio-evaluate return per unit of risk but ignore how long capital is exposed to market risk. This paper formalizes exposure-time as a measurable input in strategy evaluation by defining the exposure fraction T e (proportion of trading days with an active position) and introducing exposure-normalized measures S* = S / T e and MAR* = MAR / T e. Under binding exposure constraints, the lower-T e strategy strictly expan