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| Type | Bachelor's Thesis |
| Scope | Discipline-based scholarship |
| Title | Performance of Risk Parity Strategy on the Swiss Financial Market |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 40 |
| Date | 2019 |
| Abstract Text | This thesis examines a Risk Parity Approach on the Swiss Financial Market in which each investment in the portfolio contributes the equal amount of risk to the overall portfolio risk. Four investment strategies are cross-checked: the value-weighted market portfolio, a 60/40 portfolio, an unlevered Risk Parity portfolio and a levered Risk Parity portfolio. This approach was able to generate a higher return than the traditional benchmark portfolios in the ten years since the financial crisis in 2008 to 2017. If, however, realistic assumptions are integrated into the calculation, such as a realistic borrowing rate and thus costs of leverage as well as transaction costs, the excess return declines very sharply and one is far from finding statistical significance for the excess returns. The selection of the asset class, the method for measuring the risk of an asset or the period under consideration can have a substantial influence on the result of the investment strategy relative to the comparable portfolios. Thus, based on the results of this study, it is not appropriate to argue that the Risk Parity Approach is fundamentally superior. |
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