Portfolio construction and risk management: theory versus practice

Stefan Colza Lee and William Eid Junior

RAUSP Management Journal, 2018, vol. 53, issue 3, 345-365

Abstract: Purpose - This paper aims to identify a possible mismatch between the theory found in academic research and the practices of investment managers in Brazil. Design/methodology/approach - The chosen approach is a field survey. This paper considers 78 survey responses from 274 asset management companies. Data obtained are analyzed using independence tests between two variables and multiple regressions. Findings - The results show that most Brazilian investment managers have not adopted current best practices recommended by the financial academic literature and that there is a significant gap between academic recommendations and asset management practices. The modern portfolio theory is still more widely used than the post-modern portfolio theory, and quantitative portfolio optimization is less often used than the simple rule of defining a maximum concentration limit for any single asset. Moreover, the results show that the normal distribution is used more than parametrical distributions with asymmetry and kurtosis to estimate value at risk, among other findings. Originality/value - This study may be considered a pioneering work in portfolio construction, risk management and performance evaluation in Brazil. Although academia in Brazil and abroad has thoroughly researched portfolio construction, risk management and performance evaluation, little is known about the actual implementation and utilization of this research by Brazilian practitioners.

Keywords: Risk; Performance evaluation; Portfolio construction (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:rauspp:rausp-04-2018-009

DOI: 10.1108/RAUSP-04-2018-009

Access Statistics for this article

RAUSP Management Journal is currently edited by Flavio Hourneaux Junior and Kavita Miadaira Hamza

More articles in RAUSP Management Journal from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().