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- Title
On Risk Parity Performance.
- Authors
Filho, Émerson; Gaspar, Raquel M.
- Abstract
The authors empirically compare risk parity (RP) with traditional mean-variance theory (MVT) portfolios and naive strategies over 30 years (1990-2019) across five asset classes. They use a decade for MVT parameter estimation and 20 years for rolling investment horizons (periods of 20, 10, 5, and 1 years). RP offers balanced risk similar to minimum-variance MVT. Some RP strategies perform better in risk-adjusted returns but not against long-term horizons (10 and 20 years). Despite MVT's estimation risk, results hold when factoring transaction costs.
- Publication
Journal of Portfolio Management, 2024, Vol 50, Issue 5, p103
- ISSN
0095-4918
- Publication type
Academic Journal
- DOI
10.3905/jpm.2024.1.585