Low volatility alternative equity indices

In recent years, there has been an increasing interest in constructing low volatility portfolios. These portfolios have shown significant outperformance when compared with the market capitalization-weighted portfolios. This study analyses the low volatility portfolios in South Africa using sectors instead of individual stocks as building blocks for portfolio construction. The empirical results from back-testing these portfolios show significant outperformance when compared with their market capitalization weighted equity benchmark counterpart (ALSI). In addition, a further analysis of this study delves into the construction of the low volatility portfolios using the Top 40 and Top 100 stocks. The results also show significant outperformance over the market-capitalization portfolio (ALSI), with the portfolios constructed using the Top 100 stocks having a better performance than portfolio constructed using the Top 40 stocks. Finally, the low volatility portfolios are also blended with typical portfolios (ALSI and the SWIX indices) in order to establish their usefulness as effective portfolio strategies. The results show that the Low volatility Single Index Model (SIM) and the Equally Weight low-beta portfolio (Lowbeta) were the superior performers based on their Sharpe ratios.

Grantor dc:publisher.institution

Department of Statistical Sciences

Year dc:date.issued

2015

Author dc:creator

• Oladele, Oluwatosin Seun

Advisor dc:contributor.advisor

• Bradfield, David

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/11427/15691

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/15691