%0 Journal Article
%A Lohre, Harald
%A Neugebauer, Ulrich
%A Zimmer, Carsten
%T Diversified Risk Parity Strategies for Equity Portfolio Selection
%D 2012
%R 10.3905/joi.2012.21.3.111
%J The Journal of Investing
%P 111-128
%V 21
%N 3
%X This article investigates a new way of equity portfolio selection that provides maximum diversification along the uncorrelated risk sources inherent in the S&P 500.This diversified risk parity strategy is distinct from prevailing risk-based portfolio construction paradigms. Especially, the strategy is characterized by a concentrated allocation that actively adjusts to changes in the underlying risk structure. In addition, x-raying the risk and diversification characteristics of traditional risk-based strategies like 1/N, minimum-variance, risk parity, or the most-diversified portfolio, the authors find the diversified risk parity strategy to be superior. Although most of these alternatives crucially pick up risk-based pricing anomalies like the low-volatility anomaly, the diversified risk parity strategy more effectively exploits systematic factor tilts.TOPICS: Equity portfolio management, portfolio construction, factor-based models
%U https://joi.pm-research.com/content/iijinvest/21/3/111.full.pdf