Risk Parity and Trend-Following Approach on Asset Allocation
Aigbedion, Aisosa Kelly
Promoteur(s) :
Hübner, Georges
Date de soutenance : 23-jui-2021/25-jui-2021 • URL permanente : http://hdl.handle.net/2268.2/11632
Détails
Titre : | Risk Parity and Trend-Following Approach on Asset Allocation |
Auteur : | Aigbedion, Aisosa Kelly ![]() |
Date de soutenance : | 23-jui-2021/25-jui-2021 |
Promoteur(s) : | Hübner, Georges ![]() |
Membre(s) du jury : | Lambert, Marie ![]() Fagnant, Annick ![]() |
Langue : | Anglais |
Nombre de pages : | 60 |
Mots-clés : | [en] naive risk parity, risk parity, trend following, Sharpe ratio |
Discipline(s) : | Sciences économiques & de gestion > Finance |
Public cible : | Etudiants |
Institution(s) : | Université de Liège, Liège, Belgique |
Diplôme : | Master en sciences de gestion, à finalité spécialisée en Banking and Asset Management |
Faculté : | Mémoires de la HEC-Ecole de gestion de l'Université de Liège |
Résumé
[en] The purpose of this paper is to investigate and analyse the performance of the trend-following -risk parity portfolio approach and to examine whether or not it can be expected to outperform the 60/40 portfolio and equal-weighted approaches. Performance and risk were measured using Sharpe Ratio, Sortino Ratio, Maximum Drawdown and the sensitivity to different market conditions were analysed- the change in interest rates and equity market volatility on portfolio returns.
In the empirical study, it was found that the combination of trend-following -risk parity approach generates an acceptable expected return, when analysing the sample period from November 2000 to December 2020. The trend-following portfolios were found to significantly outperform the equal-weighted portfolio, the 60/40 portfolio and the naïve risk-parity for the investment universes but the trend-following risk parity provide a reasonable risk-adjusted return. The Sharpe ratio of the naïve risk parity & trend following was statistically significantly different from the Sharpe ratio of other passive strategies.
Results of that the naïve risk parity & trend-following showed a positive sensitivity to the change in interest rates neither when decreasing or increasing. The naïve risk parity & trend-following portfolio also reduced the volatility, maximum drawdown and negative volatility of the portfolio than other portfolios.
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