Diversifying the Diversifiers and Tracking the Tracking Error: Outperforming Cap-Weighted Indices with Limited Risk of Underperformance
研究了如何结合最大夏普比率组合和全球最小波动率组合来设计改进的股票基准，同时控制相对市值加权指数的跟踪误差，并通过分散化模型风险和相对风险控制实现稳健的超额收益。
A number of quantitative or fundamental weighting schemes have been shown to produce robust outperformance with respect to standard cap-weighted equity indices over long time periods. Over periods ranging from a few months to a few years, however, such alternative weighting schemes can generate substantial downside risk relative to cap-weighted indices, which would be a source of concern for most investment managers or chief investment officers. In this article, the authors focus on two reasonable proxies for well-diversified, efficient frontier portfolios, namely, the maximum Sharpe ratio (MSR) portfolio and the global minimum volatility (GMV) portfolio. They address the question of how to use these building blocks to design an improved equity benchmark while satisfying target levels of average and extreme tracking error with respect to cap-weighted indices. The authors find that robust proxies for the GMV portfolio provide defensive exposure to equity that does well in adverse market conditions, while robust proxies for MSR portfolios provide greater access to the upside of equity markets. Because the relative performance of these two diversification approaches depends on market conditions, they expect a combination of both approaches to lead to a smoother conditional performance and higher probability of outperformance of the cap-weighted index, an intuition that is confirmed in empirical tests. Empirical analysis also suggests that “diversifying the diversifiers” still leads to high levels of relative downside risk, in particular when the performance of cap-weighted indices is unusually strong. In this context, the authors introduce an explicit relative risk control mechanism designed to reduce the consequences of severe short-term underperformance with respect to the cap-weighted index and confirm through out-of-sample empirical tests that “tracking the tracking error” would allow investors to achieve better access to outperformance per unit of extreme relative risk taken. Overall, the results reported in this article suggest that it is possible to achieve robust outperformance versus cap-weighted indices by diversifying model risk and by controlling relative risk compared to the cap-weighted indices. <bold>TOPICS:</bold> <ext-link>Portfolio construction</ext-link>, <ext-link>portfolio theory</ext-link>, <ext-link>factor-based models</ext-link>