Publicação
Efficiency and growth: an integrated analysis of portfolio optimization via a multi-factor model in the North American stock market
| Resumo: | This paper analyzes the performance of a long-short investment strategy across a 53-year sample period, combining the Total Z-Score and Mean Variance Weight approaches. The Total Z-Score assigns equal weight to Asset Turnover, ROA, and revenue growth, while the Mean Variance Weight approach utilizes factor portfolios for optimal weight determination. The integrated approach proves effective, with the Long-Short portfolio consistently outperforming benchmarks. Challenges in long-short strategy implementation, including margin account requirements and transaction costs, surfaced. Crucially, historical success doesn’t guarantee future results. Despite these limitations, the strategy appears promising. The group report seeks to combine five strategies from different regions and markets: the Volatility Timing & Momentum (U.K. Market), the Value Premium (U.S. Market), the Efficiency & Growth (U.S. Market), the Investor Sentiment & Volatility Timing (European Markets), and the Carry & Momentum (FX Market). The Equal-weighted (EW), the Tangency (TP), and the Global Minimum Variance (GMV) portfolios were created to combine the above-mentioned portfolios. The EW portfolio showed the highest annualized return (6.26%), while the GMV had the lowest volatility (3.20%). The TP has the highest Sharpe Ratio (1.263). All portfolios performed better than the best individual strategy regarding risk-adjusted returns. |
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| Autores principais: | Knothe, Jannis Paul |
| Assunto: | Portfolio optimization Financial markets Sharpe ratio North American stock market Factor investing Fundamental analysis Efficiency Growth Asset allocation |
| Ano: | 2024 |
| País: | Portugal |
| Tipo de documento: | dissertação de mestrado |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Universidade Nova de Lisboa |
| Idioma: | inglês |
| Origem: | Repositório Institucional da UNL |
| Resumo: | This paper analyzes the performance of a long-short investment strategy across a 53-year sample period, combining the Total Z-Score and Mean Variance Weight approaches. The Total Z-Score assigns equal weight to Asset Turnover, ROA, and revenue growth, while the Mean Variance Weight approach utilizes factor portfolios for optimal weight determination. The integrated approach proves effective, with the Long-Short portfolio consistently outperforming benchmarks. Challenges in long-short strategy implementation, including margin account requirements and transaction costs, surfaced. Crucially, historical success doesn’t guarantee future results. Despite these limitations, the strategy appears promising. The group report seeks to combine five strategies from different regions and markets: the Volatility Timing & Momentum (U.K. Market), the Value Premium (U.S. Market), the Efficiency & Growth (U.S. Market), the Investor Sentiment & Volatility Timing (European Markets), and the Carry & Momentum (FX Market). The Equal-weighted (EW), the Tangency (TP), and the Global Minimum Variance (GMV) portfolios were created to combine the above-mentioned portfolios. The EW portfolio showed the highest annualized return (6.26%), while the GMV had the lowest volatility (3.20%). The TP has the highest Sharpe Ratio (1.263). All portfolios performed better than the best individual strategy regarding risk-adjusted returns. |
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