Risk Parity Portfolios for the Grouped Stocks

Agata Gluzicka ()
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Agata Gluzicka: University of Economics in Katowice

A chapter in Contemporary Trends and Challenges in Finance, 2017, pp 81-89 from Springer

Abstract: Abstract Portfolios in which the contribution of all assets are equally weighted are called the risk parity portfolios. Very often, the idea of risk parity is considered as a special type of diversification strategy. This approach had become very popular among investors, after the last economic crisis. At that time many portfolios perceived as well-diversified suddenly had become undiversified portfolios. Usually the risk parity is calculated for the individual stocks. In this article, the method of estimating the risk parity portfolios for grouped stocks was discussed. The presented model was applied to selected stocks belonging to different groups (sectors) and quoted on the Warsaw Stock Exchange. The main goal of empirical research was the analysis of risk parity portfolios calculated for the groups of stocks and also for the individual stocks. Additionally the risk parity portfolios were compared with the naive portfolios and minimum variance portfolios. All portfolios were compared according to the risk, rate of return and future profits.

Keywords: Sequential Quadratic Programming; Sharpe Ratio; Weighted Portfolio; Individual Stock; Risk Parity (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-319-54885-2_8

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DOI: 10.1007/978-3-319-54885-2_8

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