RT Journal Article
SR Electronic
T1 Sharpe Parity Redux
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP jpm.2022.1.339
DO 10.3905/jpm.2022.1.339
A1 Joseph Simonian
A1 Anna Martirosyan
YR 2022
UL https://pm-research.com/content/early/2022/02/08/jpm.2022.1.339.abstract
AB In this article, the authors investigate the performance of the Sharpe parity asset allocation strategy relative to the more well-known 60/40, mean–variance, risk parity, and min-variance strategies. Each portfolio selection strategy was tested under a number of different constraints and asset class configurations. In addition to historical data, bootstrapped simulated time series were used to test the robustness of the analysis. The primary conclusion was that the performance of each of the strategies considered was highly dependent on the constraints applied during the portfolio construction process. As such, portfolio managers choosing to implement a given portfolio construction methodology must be careful in choosing their asset universe and calibrating their asset class level constraints to give their portfolios the maximum performance advantage versus rival portfolio selection methodologies and manager benchmarks.