Investing in the Year of Corona: The Modified Risk Parity Portfolios

10 Pages Posted: 30 Nov 2020 Last revised: 10 Dec 2020

Date Written: November 25, 2020

Abstract

Extended examples of long-term, annually rebalanced portfolio performance using the modified risk parity (MRP) approach are presented. The analysis considers three distinct diversified portfolio holdings, comprising index funds, sector funds and a blended portfolio of index and sector funds.

The analysis considers the time period 2000-mid November 2020, which includes drawdown from the March 2020 worldwide outbreak of coronavirus 2019 disease.

Comparisons of MRP return performance versus competitive portfolios of index-following or balanced funds are presented. Results indicate that for sufficiently long holding periods, substantial out-performance of MRP allocation strategies relative to passive buy-and-hold benchmarks can be realized.

Keywords: Asset Allocation, Risk Parity

JEL Classification: G11

Suggested Citation

Maewal, Akhilesh and Bock, Joel R, Investing in the Year of Corona: The Modified Risk Parity Portfolios (November 25, 2020). Available at SSRN: https://ssrn.com/abstract=3738846 or http://dx.doi.org/10.2139/ssrn.3738846

Joel R Bock

Independent ( email )

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