Portfolio selection in factor investing
|Author:||Mgr. Martin Hronec|
|Year:||2017 - summer|
|Leaders:|| doc. PhDr. Jozef Baruník Ph.D.
|Work type:|| Finance, Financial Markets and Banking
|Awards and prizes:|
|Abstract:||This thesis empirically examines the role of advanced portfolio selection
methods in factor investing. These methods provide more efficient exposure
to underlying risk sources in factor portfolios. Their performance is evaluated
across number of prominent factors and compared with more naive equal- and
value- weighting, typically used in asset pricing literature as well commercial
investment vehicles. The most diversified portfolio consistently achieves the
highest returns, while having only moderate volatility and one of the lowest tail
risk exposure. On the other hand, the diversified risk parity portfolio suffers
high volatility as well as the greatest tail risk exposure, while achieving only
comparable average returns with other strategies.