The impact of volatility scaling on portfolio performance

  • Stefan Haag (Student)

Student thesis: Master's Thesis


In this paper, I examine the performance of volatility-adjusted portfolios for nine different factors and five different combination portfolios. I scale the portfolios by the inverse of the estimated variance. The variance is estimated using the previous month's realized variance, the Garch (1,1) method, and the GJR-Garch method. I find that the realized variance scaling method yields better alphas than the alternative Garch (1,1) and GJR-Garch methods. In addition, I find that there is little difference in Sharpe ratios across the scaling methods for the combination portfolios and that the volatility-adjusted portfolios tend to be positively skewed while the unmanaged portfolios are often negatively skewed.
Date of Award20 Oct 2021
Original languageEnglish
Awarding Institution
  • Universidade Católica Portuguesa
SupervisorPaul Ehling (Supervisor)


  • Volatility
  • Portfolio management
  • Garch


  • Mestrado em Finanças

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