Alpha Portfolio Risk Parity and Benchmarking: In Light of the Economic Crisis -2020


  • الباحث- د.عباس فاضل رسن


Since its launch in 2008, a Risk Parity portfolio has been subjected to testing in light of a global financial crisis. Today, the research aims to subject the portfolio and its relevant entry to the test under different conditions represented by the global economic crisis of 2020 that the whole world is experiencing and whose impact extends not only to the markets. Financial, but all productive sectors without exception, in different proportions, due to a global epidemic.

Six financial portfolios were built from the blue chip stocks of prominent American companies on the basis of an annual test and a quarterly test of those portfolios compared to the reference portfolio. Multiple performance with daily stock data for the whole year and conducting annual and semi-annual testing at the same time to reach more accurate results.

The most important conclusions showed the superiority(Alpha) of the risk equalization portfolio over the reference portfolio (index) in most of the portfolios that were built according to the type of correlation achieved and with a clear impact to the sector to which it belongs despite the economic crisis in which the global economy lies.

As for the most important recommendations, it was the adoption of this approach in building the modern portfolio under similar circumstances while overcoming its traditional recommendations regarding the type of correlation between the components of the portfolio as it did not clearly affect the superiority of the portfolio over its benchmark comparison.