![]() The efficiency gains are potentially attributed to a lower overlap of the return-generating vectors, something that is not possible, to that extent, in an all-equity portfolio, irrespective of the extent of diversification in the non-negative space. In any case, the minimum-variance portfolios and the 1/N portfolio far exceeded the Sharpe ratio of the capitalization-weighted Russell 1000 equity index. To abstract from hindsight bias, a 1/N equal-weighted portfolio was constructed and tested, consistent with some literature - it may still be the best alternative. ![]() The construction of the covariance matrix for the efficient frontiers was independent of any return estimates or dynamic volatility-switching mechanisms. The portfolio also delivered during the two bull phases in the full period over which asset history existed. ![]() This article provides evidence and analysis to show that a MAC (multi-asset-class) diversified portfolio performed well in mean-variance space and under varying market conditions, including the very adverse 2008 market crash. ![]()
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