Bootstrap Estimation of Expected Risk and Return of Strategy Equity Indices

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Date
2020-04-17
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Mark
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Budapest University of Technology and Economics
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Abstract
The aim of this article is to present the results of research associated with the ex-post estimation of expected risk, return and other characteristics of strategy equity indices and capital-weighted equity indices partially and to determine credible methods for a transparent comparison. The data sources are the MSCI and STOXX equity index providers. Suitable statistical methods and a computation-intensive method for estimating selected characteristics have been used and compared to one another. For the measurement of excess return per unit of risk a modified Sortino ratio was used, which takes into account only the downside size and frequency of returns, measuring the return to negative volatility trade-off. Based on our results, it is apparent that some strategic equity indices outperform capital-weighted equity indices in a long-term investment perspective (1997-2018). A suitable combination of strategic equity indices, namely the mix of dividend strategy and momentum strategy may lead to the highest yield / risk ratio expressed by the Sortino ratio. The outperformance path of a mix of dividends and momentum strategy indices is much more stable than either the performance of the individual strategy equity indices or capital-weighted equity indices alone.
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Periodica Polytechnica, Social and Management Sciences. 2020, vol. 28, issue 2, p. 1-10.
https://pp.bme.hu/so/article/view/13412
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Peer-reviewed
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en
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Creative Commons Attribution 4.0 International
http://creativecommons.org/licenses/by/4.0/
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