Portfolio Weighting, Risk Aversion and Stock Returns in the S&P Materials Sector: An Empirical Analysis 2006-2016

Title

Portfolio Weighting, Risk Aversion and Stock Returns in the S&P Materials Sector: An Empirical Analysis 2006-2016

Authors

Presenter(s)

Stuart W Allen

Files

Description

Over the last several years stocks in the materials sector (XLB) have experienced increased volatility. In this study, I develop a risk dampening portfolio weighting scheme in order to increase the potential for excess returns in the sector. Using portfolios of ten and twenty stocks, ranked by market cap, I calculate the standard deviation of the return on equity (ROE) for each stock over rolling 5 year periods and divide it into the standard deviation (weighted average) for all ten and twenty stocks. This scheme allows stocks with lower relative standard deviations to have higher portfolio weights. Both buy and hold and rebalancing strategies are used in the analysis. The performance benchmarks are the materials sector, XLB, and SPY, a proxy for the S&P 500 stock index.

Publication Date

4-5-2017

Project Designation

Independent Research - Undergraduate

Primary Advisor

Trevor C Collier

Primary Advisor's Department

Economics and Finance

Keywords

Stander Symposium poster

Portfolio Weighting, Risk Aversion and Stock Returns in the S&P Materials Sector: An Empirical Analysis 2006-2016

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