Abstract

The efficacy of four different portfolio allocation strategies is evaluated according to their absolute returns during different economic conditions over a period of 10 years. A comparison is drawn between the Most Diversified portfolio (MD) and three alternatives; a Minimum Variance portfolio, an Equally-Weighted portfolio and a Tangent (or Maximum Sharpe ratio) portfolio. The aim is to assess portfolio performance using cumulative returns, the Sharpe ratio and the daily volatilities of each portfolio. The four asset allocation methods are governed by multiple constraints. Although previous work has shown that MD portfolios exhibit greater diversification and a higher Sharpe ratio than other investment strategies, this was not found using developed market index data.

Details

Title
The maximum diversification investment strategy: A portfolio performance comparison
Author
Theron, Ludan 1 ; Gary van Vuuren 1   VIAFID ORCID Logo 

1  Department of Risk Management, School of Economics, North West University, Potchefstroom Campus, Potchefstroom, South Africa 
Publication year
2018
Publication date
Jan 2018
Publisher
Taylor & Francis Ltd.
e-ISSN
23322039
Source type
Scholarly Journal
Language of publication
English
DOI
https://doi.org/10.1080/23322039.2018.1427533
ProQuest document ID
2177246924
Copyright
© 2018 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license. This work is licensed under the Creative Commons Attribution License http://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License.