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Diversified reward-risk parity in portfolio construction

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 نشر من قبل Jaehyung Choi
 تاريخ النشر 2021
  مجال البحث مالية
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We introduce diversified risk parity embedded with various reward-risk measures and more generic allocation rules for portfolio construction. We empirically test advanced reward-risk parity strategies and compare their performance with an equally-weighted risk portfolio in various asset universes. The reward-risk parity strategies we tested exhibit consistent outperformance evidenced by higher average returns, Sharpe ratios, and Calmar ratios. The alternative allocations also reflect less downside risks in Value-at-Risk, conditional Value-at-Risk, and maximum drawdown. In addition to the enhanced performance and reward-risk profile, transaction costs can be reduced by lowering turnover rates. The Carhart four-factor analysis also indicates that the diversified reward-risk parity allocations gain superior performance.



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