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 Award||20 Oct 2021|
- Universidade Católica Portuguesa
|Supervisor||Paul Ehling (Supervisor)|
- Portfolio management