Skip to main content

LUP Student Papers

LUND UNIVERSITY LIBRARIES

What to own when it all crashes

Wijk, Jesper LU (2018) NEKN01 20181
Department of Economics
Abstract
This paper examines which asset classes that has given the highest risk-adjusted returns during the period of 1914-2013, with a focus on financial crises. The portfolios have been produced by calculation and optimization of the Sharpe ratio as a measure of risk-adjusted returns. The analysis included Sweden, the U.S and Japan and consisted of 9 different asset classes: global stocks, domestic stocks, short- and long-term domestic interest rates, oil, gold, silver, commod-ities and domestic housing. The results showed that in 13 out of 15 optimal risk-adjusted port-folios during financial distress, fixed-income securities were the most efficient asset. The paper also focuses on the fact that we are experiencing historically low interest... (More)
This paper examines which asset classes that has given the highest risk-adjusted returns during the period of 1914-2013, with a focus on financial crises. The portfolios have been produced by calculation and optimization of the Sharpe ratio as a measure of risk-adjusted returns. The analysis included Sweden, the U.S and Japan and consisted of 9 different asset classes: global stocks, domestic stocks, short- and long-term domestic interest rates, oil, gold, silver, commod-ities and domestic housing. The results showed that in 13 out of 15 optimal risk-adjusted port-folios during financial distress, fixed-income securities were the most efficient asset. The paper also focuses on the fact that we are experiencing historically low interest rates which might affect future optimal risk-adjusted portfolios. The Bank of Japan lowered their rates in the late 1990s, and the portfolio that were computed during this period, consisted to 2/3 of global and domestic stocks together with oil and silver. Alternative portfolios for Sweden and the U.S during the crash of 2006-2009 was also computed, where fixed-income securities were re-moved. The result was a weight of 68 per cent given to Swedish housing and 32 per cent given to gold in the Swedish portfolio, and 82 per cent given to gold and 17 per cent given to global stocks in the U.S portfolio. This last result might indicate that gold is the safe haven, which it often is seen as. (Less)
Please use this url to cite or link to this publication:
author
Wijk, Jesper LU
supervisor
organization
alternative title
Optimal risk-adjusted portfolios during financial distress
course
NEKN01 20181
year
type
H1 - Master's Degree (One Year)
subject
keywords
risk-adjusted returns, financial crash, Sharpe ratio, interest rates, safe haven
language
English
id
8957826
date added to LUP
2018-09-26 10:46:41
date last changed
2018-09-26 10:46:41
@misc{8957826,
  abstract     = {{This paper examines which asset classes that has given the highest risk-adjusted returns during the period of 1914-2013, with a focus on financial crises. The portfolios have been produced by calculation and optimization of the Sharpe ratio as a measure of risk-adjusted returns. The analysis included Sweden, the U.S and Japan and consisted of 9 different asset classes: global stocks, domestic stocks, short- and long-term domestic interest rates, oil, gold, silver, commod-ities and domestic housing. The results showed that in 13 out of 15 optimal risk-adjusted port-folios during financial distress, fixed-income securities were the most efficient asset. The paper also focuses on the fact that we are experiencing historically low interest rates which might affect future optimal risk-adjusted portfolios. The Bank of Japan lowered their rates in the late 1990s, and the portfolio that were computed during this period, consisted to 2/3 of global and domestic stocks together with oil and silver. Alternative portfolios for Sweden and the U.S during the crash of 2006-2009 was also computed, where fixed-income securities were re-moved. The result was a weight of 68 per cent given to Swedish housing and 32 per cent given to gold in the Swedish portfolio, and 82 per cent given to gold and 17 per cent given to global stocks in the U.S portfolio. This last result might indicate that gold is the safe haven, which it often is seen as.}},
  author       = {{Wijk, Jesper}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{What to own when it all crashes}},
  year         = {{2018}},
}