10052

Alexandre Rubesam
André Lomonaco Beltrame

Revista Brasileira de Finanças

We investigate minimum variance portfolios in the Brazilian equity market using different methods to estimate the covariance matrix, from the simple model of using the sample covariance to multivariate GARCH models. We compare the performance of the minimum variance portfolios to those of the following benchmarks: (i) the IBOVESPA equity index, (ii) an equally-weighted portfolio, (iii) the maximum Sharpe ratio portfolio and (iv) the maximum growth portfolio. Our results show that the minimum variance portfolio has higher returns with lower risk compared to the benchmarks. We also consider long-short 130/30 minimum variance portfolios and obtain similar results. The minimum variance portfolio invests in relatively few stocks with low βs measured with respect to the IBOVESPA index, being easily replicable by individual and institutional investors alike.

asset allocation, minimum variance portfolios, portfolio optimization, quantitative asset management, shrinkage

RUBESAM, A.; BELTRAME, A. L. Carteiras de variância mínima no Brasil. Revista Brasileira de Finanças, v. 11, n. 1, p. 81-118, 2013.

Rubesam, A., & Beltrame, A. L. (2013). Carteiras de variância mínima no Brasil. Revista Brasileira de Finanças, 11(1), 81-118.

https://www.spell.org.br/documentos/ver/10052/minimum-variance-portfolios-in-the-brazilian-equity-market/i/en

Artigo

Português

Alexander, Carol. Market Risk Analysis. John Wiley & Sons. 2008.

Ang, Andrew; Hodrick, Robert J.; Xing, Yuhang; Zhang, Xiaoyan. The Cross-Section of Volatility and Expected Returns. Journal of Finance, v. 61, p. 259-299. 2006.

Banz, Rolf W. The Relationship Between Return and Market Value of Common Stocks. Journal of Financial Economics, v. 9, p. 3-18. 1981.

Basu, Sanjoy. Investment Performance of Common Stocks in Relation to their Price-Earnings Ratios: A Test of the Efficient Market Hypothesis. Journal of Finance, v. 32, p. 663-682. 1977.

Best, Michael J.; Grauer, Robert R. On the Sensitivity of MeanVariance Efficient Portfolios to Changes in Asset Means: Some Analytical and Computational Results. Review of Financial Studies, v. 4, p. 315-342. 1991.

Blitz, David; Vliet, Pim V. The Volatility Effect. Journal of Portfolio Management, n. Fall, p. 102-113. 2007.

Caldeira, João F.; Portugal, Marcelo S. Estratégia Long-Short, Neutra Ao Mercado, e Index Tracking Baseadas Em Portfolios Cointegrados. Revista Brasileira de Financas, v. 8, p. 469-504. 2010.

Christensen, Morten. On the History of the Growth Optimal Portfolio. Unpublished manuscript. http://www.szit.bme.hu/~oti/portfolio/articles/history.pdf. 2005.

Clark, Roger; De Silva, Harinda; Thorley, Steven. MinimumVariance Portfolios in the US Equity Market. Journal of Portfolio Management, 10-24. 2006.

DeMiguel, Victor; Garlappi, Lorenzo; Nogales, Francisco J.; Uppal, Raman. A Generalized Approach to Portfolio Optimization: Improving Performance by Constraining Portfolio Norms. Management Science, v. 55, p. 798-812. 2009.

Engle, Robert F.; Sheppard, Kevin. Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models. Journal of Business & Economic Statistics, v. 20, p. 339-350. 2002.

Estrada, Javier. Geometric Mean Maximization: An Overlooked Portfolio Approach? The Journal of Investing, v. 19, p. 134-147. 2010.

Falkenstein, Erik G. Risk and Return in General: Theory and Evidence. Available at SSRN: http://ssrn.com/abstract=1420356. 2009.

Fama, Eugene F.; French, Kenneth R. Dissecting Anomalies. Journal of Finance, v. 63, p. 1653-1678. 2008.

Fama, Eugene F.; French, Kenneth R. The Cross-Section of Expected Returns. Journal of Finance, v. 47, p. 427-465. 1992.

Jagannathan, Ravi; Ma, Tongshu. Risk Reduction in Large Portfolios: Why Imposing the Wrong Constraints Helps. Journal of Finance, v. 58, p. 1651-1684. 2003.

Jegadeesh, Narasimhan; Titman, Sheridan. Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency. Journal of Finance, v. 48, p. 65-91. 1993.

Jorion, Philippe. Bayesian and CAPM Estimators of the Means: Implications for Portfolio Selection. Journal of Banking & Finance, v. 15, p. 717-727. 1991.

Jorion, Philippe. International Portfolio Diversification with Estimation Risk. Journal of Business, v. 58, p. 259-278. 1985.

Kelly, John. A New Interpretation of Information Rate. Bell System Technical Journal, v. 35, p. 917-926. 1956.

Ledoit, Olivier; Wolf, Michael. A Well-Conditioned Estimator for Large-Dimensional Covariance Matrices. Journal of Multivariate Analysis, v. 88, p. 365-411. 2004.

Ledoit, Olivier; Wolf, Michael. Honey, I Shrunk the Sample Covariance Matrix. Journal of Portfolio Management, v. 30, p. 110-119. 2004.

Ledoit, Olivier; Wolf, Michael. Robust Performance Hypothesis Testing with the Sharpe Ratio. Journal of Empirical Finance, v. 15, p. 850-859. 2008.

Lo, Andrew W.; Patel, Pankaj N. 130/30: The New Long-Only. The Journal of Portfolio Management, v. 34, p. 12-38. 2007.

Markowitz, Harry M. Portfolio Selection. Journal of Finance, v. 7, p. 77-91. 1952.

Markowitz, Harry M. Portfolio Selection. New York: John Wiley & Sons, Inc. 1959.

Merton, Robert C. On Estimating the Expected Return on the Market: An Exploratory Investigation. Journal of Financial Economics, v. 8, p. 323-361. 1980.

Michaud, Richard O. The Markowitz Optimization Enigma: Is Optimized Optimal. Financial Analysts Journal, v. 45, p. 31-42. 1989.

Santos, André A. P.; Tessari, Cristina. Técnicas Quantitativas de Otimização de Carteiras Aplicadas Ao Mercado de Ações Brasileiro. Revista Brasileira de Finanças, v. 10, p. 369-394. 2012.

Sharpe, William F. A Simplified Model for Portfolio Analysis. Management Science, v. 9, p. 277-293. 1963.

Thomé, Cesar N., Leal, Ricardo P. C.; Almeida, Vinício de S. Um Índice de Mínima Variância de Ações Brasileiras. Economia Aplicada, v. 15, p. 535-557. 2011.