Portfolios - EDHEC-Risk

Diversifying the Diversifiers – Long-Term Analysis
• Both diversifiers add value, as can be seen from the improvement
in Sharpe ratio (without impact on extreme risk levels), but not
necessarily under the same market conditions.
Cap­Weighted
Minimum
Volatility
Maximum Sharpe
Ratio
Ann Return 9.60% 10.89% 11.02%
Ann Std 15.46% 14.10% 14.53%
Ann Semi Dev 11.28% 10.39% 10.73%
Tracking Error 0.00% 2.76% 2.77%
Market β 1.00 0.90 0.93
Sharpe Ratio 0.27 0.39 0.39
Sortino Ratio 0.39 0.55 0.55
Information Ratio ‐ 0.47 0.51
Treynor Ratio 0.04 0.06 0.06
Max Drawdown 53.83% 50.42% 51.72%
95% VaR 3.31% 3.02% 3.14%
99% VaR 7.77% 7.64% 7.77%
Skewness ‐0.34 ‐0.50 ‐0.52
Kurtosis 8.06 9.09 8.82
95% Value­at­Tracking at Error Risk
(VaTER)
‐
3.89% 3.96%
The period of analysis is from 2nd January 1959 to 31st December 2010. All statistics are annualized and performance ratios that involve the average returns are
based on the geometric average.
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