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Paper Information

Journal:   JOURNAL OF FINANCIAL ECONOMICS (FINANCIAL ECONOMICS AND DEVELOPMENT)   winter 2019 , Volume 12 , Number 45 ; Page(s) 51 To 71.

Performance of risk-based portfolios under different market conditions: Evidence from Iranian stock market

Author(s):  ABOUNOORI ESMAEIL*, TEHRANI REZA, Shamani Masoud
* Semnan University, Semnan, Iran
This study evaluates the performance of risk-based portfolios under different market conditions. We compare four strategies, namely, the equally weighted portfolio (EW), the global minimum variance portfolio (GMV), the most diversified portfolio (MDP) and the equal risk contribution portfolio (ERC) for the 2009-2016 period and 30 top companies of the stock exchange. No single strategy consistently dominates the others, under different market conditions. As expected, the GMV has the least downside risk. Although there is no clear winner among the risk-based portfolios, there is evidence that they generally outperform the market capitalization based portfolio. These strategies are also compared with market index as market capitalization and the most popular way of making the portfolio. To achieve this goal, the portfolios of the portfoliosortinoand omega are used, as well as the difference between Sharpe ratios each of the risk-based portfolios with Sharpe ratio of the market index. To evaluate the adverse risk of strategy risk measurement measures such as VaR and CVaR were used. The results show that the GMV model has the least adverse risk among strategies.
Keyword(s): Risk-based portfolio,Most diversified portfolio,Equal risk contribution,Minimum variance portfolio,Sharpe ratio
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