Performance Comparison of Minimum Variance, Market and Eigen Portfolios for US Equities

摘要

The Sharpe ratios and PNL curves of minimum variance, market and eigenportfolios for stocks in the Dow Jones Industrial Average (DJIA) index are calculated. We employed in this study (a) the exponential function to approximate the measured cross correlations of the end of day (EOD) returns for US equities in DJIA, and (b) their empirical correlation and covariance matrices to design the three portfolio types, and compare their market performance from May 4, 1999 to November 1, 2018. It is shown that the performances of portfolios derived by using exponential model based and empirical correlation and covariance matrices are consistent. We also displayed the PNL curve of DIA for performance comparison. It is observed from these PNLs that the first eigenportfolio significantly outperforms the other portfolios and DIA.