A Kurtosis Based Portfolio Factor Weighting Model for 5 Glamour Stocks: An Empirical Analysis 2009-2019
Graham Thomas Trueman, Camille Rhiann Lubic
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Glamour stocks like MasterCard, Apple, Amazon, Netflix, and Google have enjoyed tremendous returns over the last several years as investors can't seem to buy enough of their shares. In this study we examine the relative performance of each stock when it is portfolio weighted by the fourth moment of its return distribution around its mean i.e., kurtosis (k). Beginning in 2009, we calculate the 12 month K for each of the 5 glamour stocks and assign a weight (the higher the k the higher the weight) that determines the shares invested in each stock (The overall initial investment is $1,000,000). The original shares are adjusted each year based on the yearly changes in the k values. The 5 stock portfolio returns are compared to the S&P 500 index as well as an equal weighted portfolio of the 5 stocks. The hypothesis that we test are; (1. The cumulative returns of the k weighted 5 stock portfolio outperform SPY cumulative returns and 2. The cumulative return of the k weighted 5 stock portfolio outperform the equally weighted 5 stock portfolio. 3. Returns to each of the 5 stocks are directly related to k i.e. the higher the k, the higher the returns on both an annual and cumulative basis.
Tony S. Caporale, Robert D. Dean
Primary Advisor's Department
Economics and Finance
Stander Symposium project, School of Business Administration
United Nations Sustainable Development Goals
"A Kurtosis Based Portfolio Factor Weighting Model for 5 Glamour Stocks: An Empirical Analysis 2009-2019" (2021). Stander Symposium Projects. 2278.