Risk-Return Measures of Ex Post Portfolio Performance

1969 ◽  
Vol 4 (4) ◽  
pp. 449 ◽  
Author(s):  
Keith V. Smith ◽  
Dennis A. Tito
Keyword(s):  
Portfolio Performance ◽  
Risk Return ◽  
Ex Post

scholarly journals A critical evaluation of risk-return characteristics of environmentally focused stock’s companies

2013 ◽  
Vol 61 (2) ◽  
pp. 501-506
Author(s):  
Stanislav Škapa ◽  
Tomáš Meluzín ◽  
Marek Zinecker
Keyword(s):  
Critical Evaluation ◽  
Risk Return ◽  
Ex Post ◽  
Asset Class ◽  
Asset Classes

The objective of the paper is to critically evaluate and determine risk-return profile environmentally focused stock’s companies which are covered by STOXX Global ESG Environmental Leaders Index and whether this index should be taken in as an independent asset class of investments portfolio for its risk-return improvement. This paper gives an empirical view on the ex-post asset classes characteristics focused mainly on risk side of investment.

scholarly journals Risk Return Trade-Off in Relaxed Risk Parity Portfolio Optimization

2020 ◽  
Vol 13 (10) ◽  
pp. 237 ◽  
Author(s):  
Vaughn Gambeta ◽  
Roy Kwon
Keyword(s):  
Parity Violation ◽  
Expected Returns ◽  
Portfolio Performance ◽  
Trade Off ◽  
Risk Return ◽  
Performance Risk ◽  
Cone Model ◽  
Second Order Cone ◽  
Risk Parity ◽  
Parity Condition

This paper formulates a relaxed risk parity optimization model to control the balance of risk parity violation against the total portfolio performance. Risk parity has been criticized as being overly conservative and it is improved by re-introducing the asset expected returns into the model and permitting the portfolio to violate the risk parity condition. This paper proposes the incorporation of an explicit target return goal with an intuitive target return approach into a second-order-cone model of a risk parity optimization. When the target return is greater than risk parity return, a violation to risk parity allocations occurs that is controlled using a computational construct to obtain near-risk parity portfolios to retain as much risk parity-like traits as possible. This model is used to demonstrate empirically that higher returns can be achieved than risk parity without the risk contributions deviating dramatically from the risk parity allocations. Furthermore, this study reveals that the relaxed risk parity model exhibits advantageous traits of robustness to expected returns, which should not deter the use of expected returns in risk parity model.

scholarly journals Climate change investment risk: optimal portfolio construction ahead of the transition to a lower-carbon economy

2019 ◽  
Author(s):  
Davide Benedetti ◽  
Enrico Biffis ◽  
Fotis Chatzimichalakis ◽  
Luciano Lilloy Fedele ◽  
Ian Simm
Keyword(s):  
Fossil Fuel ◽  
Portfolio Construction ◽  
Investment Risk ◽  
Carbon Pricing ◽  
Risk Return ◽  
Ex Post ◽  
Alternative Approaches ◽  
Potential Impact ◽  
Carbon Economy ◽  
Lower Carbon

AbstractThere is an increasing likelihood that governments of major economies will act within the next decade to reduce greenhouse gas emissions, probably by intervening in the fossil fuel markets through taxation or cap & trade mechanisms (collectively “carbon pricing”). We develop a model to capture the potential impact of carbon pricing on fossil fuel stocks, and use it to inform Bayesian portfolio construction methodologies, which are then used to create what we call Smart Carbon Portfolios. We find that investors could reduce ex-post risk by lowering the weightings of some fossil fuel stocks with corresponding higher weightings in lower-risk fossil fuel stocks and/or in the stocks of companies active in energy efficiency markets. The financial costs of such de-risking strategy are found to be statistically negligible in risk-return space. Robustness of the results is explored with alternative approaches.

The evolution of Belgium REITs

2019 ◽  
Vol 37 (4) ◽  
pp. 345-362 ◽  
Author(s):  
Muhammad Jufri Marzuki ◽  
Graeme Newell
Keyword(s):  
Investment Strategy ◽  
Added Value ◽  
Portfolio Optimisation ◽  
Portfolio Performance ◽  
Dividend Yield ◽  
Investment Opportunity ◽  
Social Infrastructure ◽  
Content Type ◽  
Ex Post

PurposeThe Belgium Real Estate Investment Trust (REIT) market was created primarily to facilitate a transparent, professionally managed and fiscally efficient market, providing access to the European property markets. Being the 2nd oldest REIT market in Europe, it has undergone many evolutionary changes over the years that add to its considerable stature as a sophisticated investment opportunity. This includes an increased recent focus on the social infrastructure property sectors such as healthcare, care facilities and nursing homes, consistent with the evolving investment mandates requiring stronger integration of environmental, social and governance (ESG) aspects in the investment strategy formulation. The purpose of this paper is to highlight the strategic transformation of Belgium REITs and empirically assess their performance attributes over 1995–2018. Sub-period performance dynamics of Belgium REITs in the pre-global financial crises (GFC) (1995–2007) and post-GFC (2009–2018) contexts are provided.Design/methodology/approachIn total, 23-year monthly total returns over 1995–2018 were used to analyse the risk-adjusted performance and portfolio diversification potential of Belgium REITs. The traditional mean-variance portfolio optimisation model using theex-postreturns, risk and correlation coefficient of Belgium REITs and other financial assets was developed to determine the added-value benefits of Belgium REITs in a diversified investment framework. The analysis was further extended to cover the sub-periods of pre-GFC (1995–2007) and post-GFC (2009–2018).FindingsThe results of the analysis provide a strong investment case for Belgium REITs, as they are able to deliver a discernible premium in the total return performance, superior risk-adjusted returns and strong diversification benefits with the stock market in a long-term investment horizon. Broadly consistent results are similarly observed in the sub-period analysis over varying market conditions. Importantly, the role of Belgium REITs in a diversified investment framework was also empirically validated, as they enhanced the mixed-asset portfolio performance comprised of the traditional asset classes of stocks and bonds across a broad portfolio risk-return spectrum. Dividend yield was also found to be a key component of the financial performance of Belgium REITs.Practical implicationsThe Belgium REIT market has evolved to become the 5th largest market in Europe by the capitalisation volume. This is mainly due to the robust regulatory support and innovations since its debut which have resulted in a polished framework that is both supportive and attractive to financial players and investors. The broad direct consequence of this paper is to highlight the performance attributes of Belgium REITs, adding clarity to the ongoing discussion regarding the viability of European REITs as a liquid and tax transparent route for institutional investors to obtain their property exposure. The strong dividend yield and ESG/social infrastructure focus of Belgium REITs sees Belgium REITs well-placed going forward to meet the evolving investment mandates from major investors.Originality/valueThis paper is the first empirical investigation that elucidates the risk-adjusted performance and role of Belgium REITs as an important property investment opportunity. It equips investors and practitioners with an independent and comprehensive empirical validation of the strategic role of Belgium REITs in a portfolio. Well-informed and practical property investment decision making regarding the use of Belgium REITs for access to the property asset class is the main outcome of this paper.

A Reexamination of the Ex Post Risk-Return Tradeoff on Common Stocks

1979 ◽  
Vol 14 (2) ◽  
pp. 395
Author(s):  
Richard W. McEnally ◽  
David E. Upton
Keyword(s):  
Risk Return ◽  
Ex Post ◽  
Common Stocks

scholarly journals Emerging Equity Markets: To Invest Or Not To Invest?

2011 ◽  
Vol 22 (1) ◽  
Author(s):  
Xavier Garza-Gómez ◽  
Massoud Metghalchi
Keyword(s):  
Stock Market ◽  
Emerging Markets ◽  
Equity Markets ◽  
Portfolio Performance ◽  
Specific Time ◽  
Ex Post ◽  
Time Periods ◽  
The U.S ◽  
Over Time

Numerous studies suggest that investors diversifying their portfolios with equity of emerging markets benefit from increased returns and/or reduced volatility. Using a 16-year sample from 1988 to 2003, we test this assertion and find that ex-post benefits to U.S. investors in this period are small. Our tests show that the improvement in portfolio performance is not consistent through time, and it is statistically significant only when we restrict our analysis to some regions and/or specific time periods. We find that the lack of significant gains of diversifying into emerging markets is caused by problems with the two main sources of diversification benefits: contrary to expectations, emerging markets have low relative realized returns and their correlation with the U.S. stock market has increased over time.

Enhancing Portfolio Performance in Global Equity Allocation with a Forward-Looking Indicator

2018 ◽  
Keyword(s):  
Equilibrium State ◽  
Portfolio Optimization ◽  
Asset Allocation ◽  
Economic Freedom ◽  
Equity Markets ◽  
Portfolio Performance ◽  
Risk Minimization ◽  
Expected Return ◽  
Ex Post ◽  
Forward Looking

The Black–Litterman model provides a more reasonable platform for portfolio optimization and asset allocation, as compared to the traditional CAPM approach, by presenting an equilibrium state of the markets and only deviating from that equilibrium state with forward-looking strategic views. The Index of Economic Freedom (IEF) can be used as a handy tool for forming such strategic views on global markets. Ex-post performance analysis of portfolios covering both developed and developing equity markets constructed with CAPM, Black–Litterman equilibrium implied return, and Black–Litterman absolute view approaches shows that by smoothing expected return with changes in the IEF, significantly superior portfolio performance can be achieved at a lower risk. The Index of Economic Freedom contains superior information in terms of idiosyncratic country-specific risks, which the market seems to ignore or under price. This study has particular relevance to asset allocation strategy, portfolio optimization, and risk minimization in the context of global equity markets.

Hidden “holes” in the capital of banks and the supply of credit to the real sector of economy

2018 ◽  
pp. 49-68 ◽  
Author(s):  
M. E. Mamonov
Keyword(s):  
Credit Risk ◽  
The Other ◽  
Real Sector ◽  
Capital Management ◽  
Loan Loss ◽  
Short Term ◽  
The Real ◽  
Ex Post ◽  
The One

Our analysis documents that the existence of hidden “holes” in the capital of not yet failed banks - while creating intertemporal pressure on the actual level of capital - leads to changing of maturity of loans supplied rather than to contracting of their volume. Long-term loans decrease, whereas short-term loans rise - and, what is most remarkably, by approximately the same amounts. Standardly, the higher the maturity of loans the higher the credit risk and, thus, the more loan loss reserves (LLP) banks are forced to create, increasing the pressure on capital. Banks that already hide “holes” in the capital, but have not yet faced with license withdrawal, must possess strong incentives to shorten the maturity of supplied loans. On the one hand, it raises the turnovers of LLP and facilitates the flexibility of capital management; on the other hand, it allows increasing the speed of shifting of attracted deposits to loans to related parties in domestic or foreign jurisdictions. This enlarges the potential size of ex post revealed “hole” in the capital and, therefore, allows us to assume that not every loan might be viewed as a good for the economy: excessive short-term and insufficient long-term loans can produce the source for future losses.

Sign in / Sign up

Export Citation Format

Share Document