2011-04: Will My Risk Parity Strategy Outperform?


We gauge the return-generating potential and risk inherent in four investment strategies: value weighted, fixed mix, and levered and unlevered risk parity, over an 85-year horizon. There are three essential conclusions from our study. First, even over periods lasting decades, the specific start and end dates of a backtest can have a material effect on the results; second, transaction costs can negate apparent out- performance; third, statistical significance of findings needs to be assessed.

Publication date: 
November 11, 2011
Publication type: 
2011 Working Papers