Abstract

http://ssrn.com/abstract=2136827
 


 



Risk-Factor Diversification and Portfolio Selection


Scott N. Pappas


Griffith University - Griffith Business School

Robert J. Bianchi


Griffith University - Griffith Business School; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR)

Michael E. Drew


Griffith University; Centre for International Finance and Regulation (CIFR); Financial Research Network (FIRN)

Rakesh Gupta


Griffith University - Griffith Business School; CQ University; Association of Personal Finance and Investments; Financial Research Network (FIRN)

August 27, 2012

25th Australasian Finance and Banking Conference 2012

Abstract:     
Traditionally, investment portfolios have been constructed with a focus on what asset classes to invest in and how much to invest in each. Recent research, however, has shown that focusing on risk-factor allocations, rather than asset class allocations, can result in better risk-adjusted portfolio performance. The existing literature has focused on simple allocation strategies such as equal-weighted and equal-risk-weighted portfolios. In addition to these simple allocation techniques, this paper compares the performance using mean-variance analysis, and presents evidence that the outperformance of risk-factor diversification may not be as conclusive as has been previously presented in the literature. While confirming some of the prior findings on risk-factor diversification, the research shows that previous findings may be subject to strong caveats. Specifically, the evidence suggests that the selection of risk-factors, portfolio selection techniques and time-period have a large impact on performance outcomes.

Number of Pages in PDF File: 33

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Date posted: August 28, 2012  

Suggested Citation

Pappas, Scott N. and Bianchi, Robert J. and Drew, Michael E. and Gupta, Rakesh, Risk-Factor Diversification and Portfolio Selection (August 27, 2012). 25th Australasian Finance and Banking Conference 2012. Available at SSRN: http://ssrn.com/abstract=2136827 or http://dx.doi.org/10.2139/ssrn.2136827

Contact Information

Scott N. Pappas (Contact Author)
Griffith University - Griffith Business School ( email )
Brisbane, Queensland 4111
Australia
Robert J. Bianchi
Griffith University - Griffith Business School ( email )
Brisbane, Queensland 4111
Australia
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

Centre for International Finance and Regulation (CIFR) ( email )
Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Michael E. Drew
Griffith University ( email )
Brisbane, Queensland 4111
Australia
+ 61 7 373 55311 (Phone)
+ 67 7 373 53719 (Fax)
Centre for International Finance and Regulation (CIFR) ( email )
Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

Rakesh Gupta
Griffith University - Griffith Business School ( email )
Brisbane, Queensland 4111
Australia
+61 7 37357593 (Phone)
+61 7 3735 3719 (Fax)
CQ University ( email )
B-33, G-26
Fabie
North Rockhampton, QLD 4701
Australia
+61 7 4930 9158 (Phone)
Association of Personal Finance and Investments
Bruce Highway
Rockhampton
Australia
61749309158 (Phone)
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

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