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Ranking better than optimizing?

Ranking better than optimizing?

03-06-2015 | From the field

A paper* compares the performance of low-volatility portfolios constructed by using a ranking methodology versus portfolios constructed with mean/variance optimization. The idea behind ranking is to simply buy a basket of the lowest-volatility stocks, while optimization involves sophisticated algorithms and risk models.

  • David Blitz
    David
    Blitz
    Head of Quant Research

The paper concludes that both approaches are equally effective in reducing portfolio volatility over a long-term investment horizon. When we investigated this issue, we found similar results, but also that ranking offers various advantages, such as increased transparency of the investment process. Based on this, we decided to adopt a ranking approach for our low-volatility Conservative Equities strategies.

Blijf op de hoogte van kwantitatieve inzichten
Blijf op de hoogte van kwantitatieve inzichten
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From the field
From the field

Onze onderzoekers publiceren veel whitepapers die zijn gebaseerd op hun eigen empirische onderzoek, maar ze kijken ook naar kwantitatief onderzoek dat door anderen is gedaan. David Blitz, hoofd Quant Equities Research, vertelt over opvallende externe papers.

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