Will My Risk Parity Strategy Outperform?

Will My Risk Parity Strategy Outperform?

The authors gauged the return-generating potential of four investment strategies: value weighted, 60/40 fixed mix, and unlevered and levered risk parity. They report three main findings: (1) Even over periods lasting decades, the start and end dates of a backtest can have a material effect on result...

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Veröffentlicht in:Financial analysts journal 2012-11, Vol.68 (6), p.75-93
Hauptverfasser: Anderson, Robert M., Bianchi, Stephen W., Goldberg, Lisa R.
Format: Artikel
Sprache:eng
Schlagworte:
Borrowing
Capital assets
Cost estimates
Deposit rates
Eurodollars
Financial leverage
Financial portfolios
Interest rates-deposits
Investment policy
Investment risk
Parity
Pension funds
Portfolio Management
Rates of return
Risk
Statistical significance
Stock prices
Studies
Treasury bonds
United States Treasury bills
Volatility
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Beschreibung
Zusammenfassung:The authors gauged the return-generating potential of four investment strategies: value weighted, 60/40 fixed mix, and unlevered and levered risk parity. They report three main findings: (1) Even over periods lasting decades, the start and end dates of a backtest can have a material effect on results; (2) transaction costs can reverse ranking, especially if leverage is used; and (3) a statistically significant return premium does not guarantee outperformance over reasonable investment horizons.
ISSN:0015-198X
1938-3312
DOI:10.2469/faj.v68.n6.7