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Diversified Risk Parity Strategies for Equity Portfolio Selection

Research output: Contribution to Journal/Magazine › Journal article › peer-review

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Diversified Risk Parity Strategies for Equity Portfolio Selection. / Lohre, Harald; Neugebauer, Ulrich; Zimmer, Carsten.
In: Journal of Investing, Vol. 21, No. 3, 31.08.2012, p. 111-128.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Lohre, H, Neugebauer, U & Zimmer, C 2012, 'Diversified Risk Parity Strategies for Equity Portfolio Selection', Journal of Investing, vol. 21, no. 3, pp. 111-128. https://doi.org/10.3905/joi.2012.21.3.111

APA

Lohre, H., Neugebauer, U., & Zimmer, C. (2012). Diversified Risk Parity Strategies for Equity Portfolio Selection. Journal of Investing, 21(3), 111-128. https://doi.org/10.3905/joi.2012.21.3.111

Vancouver

Lohre H, Neugebauer U, Zimmer C. Diversified Risk Parity Strategies for Equity Portfolio Selection. Journal of Investing. 2012 Aug 31;21(3):111-128. doi: 10.3905/joi.2012.21.3.111

Author

Lohre, Harald ; Neugebauer, Ulrich ; Zimmer, Carsten. / Diversified Risk Parity Strategies for Equity Portfolio Selection. In: Journal of Investing. 2012 ; Vol. 21, No. 3. pp. 111-128.

Bibtex

@article{82bbda6b1f1d43168e99624c96d8e80d,
title = "Diversified Risk Parity Strategies for Equity Portfolio Selection",
abstract = "This article investigates a new way of equity portfolio selection that provides maximum diversification along the uncorrelated risk sources inherent in the S&P 500. This diversified risk parity strategy is distinct from prevailing risk-based portfolio construction paradigms. Especially, the strategy is characterized by a concentrated allocation that actively adjusts to changes in the underlying risk structure. In addition, x-raying the risk and diversification characteristics of traditional risk-based strategies like 1/N, minimum-variance, risk parity, or the most-diversified portfolio, the authors find the diversified risk parity strategy to be superior. Although most of these alternatives crucially pick up risk-based pricing anomalies like the low-volatility anomaly, the diversified risk parity strategy more effectively exploits systematic factor tilts.",
keywords = "Equity portfolio management, portfolio construction, factor-based models",
author = "Harald Lohre and Ulrich Neugebauer and Carsten Zimmer",
year = "2012",
month = aug,
day = "31",
doi = "10.3905/joi.2012.21.3.111",
language = "English",
volume = "21",
pages = "111--128",
journal = "Journal of Investing",
issn = "2168-8613",
publisher = "Portfolio Management Research",
number = "3",

}

RIS

TY - JOUR

T1 - Diversified Risk Parity Strategies for Equity Portfolio Selection

AU - Lohre, Harald

AU - Neugebauer, Ulrich

AU - Zimmer, Carsten

PY - 2012/8/31

Y1 - 2012/8/31

N2 - This article investigates a new way of equity portfolio selection that provides maximum diversification along the uncorrelated risk sources inherent in the S&P 500. This diversified risk parity strategy is distinct from prevailing risk-based portfolio construction paradigms. Especially, the strategy is characterized by a concentrated allocation that actively adjusts to changes in the underlying risk structure. In addition, x-raying the risk and diversification characteristics of traditional risk-based strategies like 1/N, minimum-variance, risk parity, or the most-diversified portfolio, the authors find the diversified risk parity strategy to be superior. Although most of these alternatives crucially pick up risk-based pricing anomalies like the low-volatility anomaly, the diversified risk parity strategy more effectively exploits systematic factor tilts.

AB - This article investigates a new way of equity portfolio selection that provides maximum diversification along the uncorrelated risk sources inherent in the S&P 500. This diversified risk parity strategy is distinct from prevailing risk-based portfolio construction paradigms. Especially, the strategy is characterized by a concentrated allocation that actively adjusts to changes in the underlying risk structure. In addition, x-raying the risk and diversification characteristics of traditional risk-based strategies like 1/N, minimum-variance, risk parity, or the most-diversified portfolio, the authors find the diversified risk parity strategy to be superior. Although most of these alternatives crucially pick up risk-based pricing anomalies like the low-volatility anomaly, the diversified risk parity strategy more effectively exploits systematic factor tilts.

KW - Equity portfolio management

KW - portfolio construction

KW - factor-based models

U2 - 10.3905/joi.2012.21.3.111

DO - 10.3905/joi.2012.21.3.111

M3 - Journal article

VL - 21

SP - 111

EP - 128

JO - Journal of Investing

JF - Journal of Investing

SN - 2168-8613

IS - 3

ER -