The impact of covariance misspecification in risk-based portfolios

The aim of our research is to study the impact of covariance misspecification for a wide set of risk-based portfolios. This set is composed of the equal-risk-contribution portfolio (Maillard, Roncalli, and Te¨ıletche [2010]), the maximum-diversification portfolio (Choueifaty and Coignard [2008]), the risk-efficient portfolio (Amenc, Goltz, Martellini, and Retkowsky [2011]) and the minimum-variance portfolio. Because of its simplicity, we also included the inverse-volatility portfolio.

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