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Is Systematic Risk Diversifiable? Presentation of a Portfolio Model that Eliminates Systematic Risk

12 Pages Posted: 5 Dec 2014  

Hellmut D. Scholtz

Independent

Date Written: December 4, 2014

Abstract

The possibility to minimize volatility of the systematic risk while maximizing returns, is the use of an optimized buy long/sell short strategy that takes into account, that the market model is kinky. The equation of the market model – including a beta plus for increasing markets and a beta minus for descending markets – seems to be more qualified for this reason. The following approach shows the derivation of equations for an optimal configuration of a mix of stocks. These equations and some examples and figures of optimized portfolios – including some tests of significance – support strategies for investments in leveraged portfolios also. The approach seems to modify the meaning of "nondiversifiable-risk" of the market risk.

Keywords: market neutrality, alpha strategy, risk insurance, avoiding ruin, nondiversifiable-risk

JEL Classification: G11, G22, G23, G29, G31

Suggested Citation

Scholtz, Hellmut D., Is Systematic Risk Diversifiable? Presentation of a Portfolio Model that Eliminates Systematic Risk (December 4, 2014). Available at SSRN: https://ssrn.com/abstract=2533943 or http://dx.doi.org/10.2139/ssrn.2533943

Hellmut D. Scholtz (Contact Author)

Independent ( email )

No Address Available

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