Exhibiting Abnormal Returns Under a Risk Averse Strategy

Dimitrios G. Konstantinides () and Georgios C. Zachos ()
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Dimitrios G. Konstantinides: University of the Aegean
Georgios C. Zachos: University of the Aegean

Methodology and Computing in Applied Probability, 2019, vol. 21, issue 2, 551-566

Abstract: Abstract This paper is devoted to the investment strategies that combine asset pricing models and coherent risk measures. In particular, we utilize the theoretical framework of Balbas et al. (J Risk 18(4):25–52, 2016), which suggests that simply by managing a portfolio of assets, an investor can achieve risk that converges to −∞ and returns that converge to + ∞. We contribute on that framework by providing evidence that arise from the CAPM model, in regard to the efficient market hypothesis. In addition, our results suggest that an investor can exhibit returns that outperform the market index by managing a portfolio less volatile than the market.

Keywords: Market efficiency; Predictive ability; Coherent risk measures; Spectral risk measures; Risk premium; 49K27 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s11009-018-9673-9

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