Sunday, March 20, 2011

Spain weekly portfolio recommendation (from 21 to 25, March 2011)

The low volatility portfolio recommended for this week is (ticker notation):

    'ACS'    'EBRO'    'ENG'    'IDR'    'ITX'    'REE'   'TEF'
Although I recommend a portfolio composition every week, it is desirable to maintain this composition for four weeks, and then rebalance with the new composition.
There is no difference in the portfolio composition respect to that of the last month. For this reason, the turnover from last month is only 1% (due to the portfolio growth in the last four weeks).
Regarding the performance, over the last year (52 weeks), the strategy attained a volatility of 17% (versus 28% of the IBEX35).

The weekly 95%-VaR was 4.0% (versus 5.2% of the IBEX35).

The last year annualized Sharpe ratio of the low vol strategy was 0.30 (after proportional transaction costs of 40 bps were discounted). On the other hand, the SR of the IBEX35 was -0.11 over the same period.

Using a 52-weeks historical method over the last year, the low-vol portfolio attained always a higher mean return than that of the IBEX35. Moreover, the volatility of the low-vol portfolio was always less than that of the IBEX35.

I have omitted more details regarding the persistence of these conclusions over a longer history because they are roughly the same as those in the previous posts.

As a summary, the low-volatility strategy dominates the market index (always, and over the last year), showing it attains consistently better risk-adjusted returns.

No comments:

Post a Comment