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Project Advisor 2
Dimitri B. Papadimitriou
This article mainly discusses the effectiveness of building a risk parity model in China’s financial market. Starting from Markowitz’s Modern Portfolio Theory, this article explores the mathe- matical foundation of the Capital Asset Pricing Model (CAPM) and its limitations. By exploring the role of Sharpe ratio in CAPM and risk parity, this article proves that risk parity strategy is actually an approximation of optimal Sharpe ratio portfolio. Through an empirical analysis of the Chinese financial market, this article in the last chapter builds a proposed asset allocation portfolio based on the classic risk parity model and backtests by historical data to exam its effectiveness, showing the ability of risk adjustment and returns during the Covid-19 period.
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Zeng, Lixue, "CAPM and Risk Parity – an Empirical Analysis on China Financial Market" (2021). Senior Projects Spring 2021. 195.
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