The benefits of optimized portfolios- An empirical comparison between optimized portfolios and benchmarks
Uncertainty about the future is an everlasting part of investing. This study aims at testing the historical performance out-of-sample for optimized portfolios and if the performance was superior to benchmarks. 11 different portfolios are compared to two different benchmarks; the naive- and market-capitalized portfolio. The portfolios are optimized using popular weighting schemes aimed at minimizing risk. The tested portfolios comprised 6 different minimum-variance portfolios and 5 equal-risk contributing portfolios. We designed this study to focus on the European market and constituents part of EURO STOXX 50 between 2006 and 2021. Previous studies are contradicting in their findings regarding the performance of optimized portfolios. The methodology is designed to generate an overview of standard performance measures such as annualized return, Sharpe ratios, and maximum drawdowns, and we combined this overview with statistical tests on Jensen’s alpha and annualized Sharpe ratios. We found evidence of superiority amongst our optimized portfolios compared to the market-capitalized benchmark, but no evidence of out-performance against the naive portfolio.
MSc in Finance
Global Minimum Variance
Equal Risk Contribution
Comparison between portfolio weighting schemes
MetadataShow full item record
Showing items related by title, author, creator and subject.
Andréason, Anna; Gustavsson, Janette (2010)Samtal kring vårt gemensamma intresse för dokumentation mynnade ut i att vi blev nyfikna på det Internetbaserade portfolioprogrammet @tt slöjda. I arbetets bakgrund beskriver vi hur styrdokumenten visar på vikten av ...
Performance of Small- and Large-cap stock portfolios- The importance of market anomalies across business cycles Hulth, Erik (2021-06-30)This Master´s thesis investigated the importance of the market anomalies size (market capitalization), value (Book-to-Market ratio) and momentum (lagged short-term momentum) for equity returns of small- and large-cap ...
Winberg, Jonathan (2019-11-27)Abstract This research paper studies the interaction between monthly returns of sin stock portfolios, where the purpose is to get an understanding of what impact an exclusion of sin stocks can have on portfolio returns ...