Equal risk contribution adopts time series momentum
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- Master of Science 
We study risk based portfolios with an emphasis on equal risk contribution, in a time series momentum setting. The benchmark strategies in which we compare the equal risk contribution includes inverse volatility, minimum variance, 1/N and 60/40. We perform an out of sample horserace of all strategies in a broad asset class environment. We then compare these portfolios to time series momentum long-only and long-short portfolios made up of the constituents of the broad asset classes. We find that risk based portfolios offers attractive traits mainly by controlling risk and avoiding large drawdowns. We also find that time series momentum portfolios add significant value with low market exposure and moderate momentum exposure, avoiding large drawdowns. We are skeptical of the suitability of the long-short portfolios, even though they clearly offer the best returns.
Masteroppgave(MSc) in Master of Science in Finance - Handelshøyskolen BI, 2017