Bootstrap Estimation of Expected Risk and Return of Strategy Equity Indices

  • Veronika Novotná
    Affiliation

    Department or Informatics, Faculty of Business and Management, Brno University of Technology, Kolejní 2906/4, 612 00 Brno, Czech Republic

  • Stanislav Škapa
    Affiliation

    Department or Informatics, Faculty of Business and Management, Brno University of Technology, Kolejní 2906/4, 612 00 Brno, Czech Republic

Abstract

The aim of this article is to present the results of research associated with the ex-post estimation of expected risk, return and other characteristics of strategy equity indices and capital-weighted equity indices partially and to determine credible methods for a transparent comparison. The data sources are the MSCI and STOXX equity index providers. Suitable statistical methods and a computation-intensive method for estimating selected characteristics have been used and compared to one another.
For the measurement of excess return per unit of risk a modified Sortino ratio was used, which takes into account only the downside size and frequency of returns, measuring the return to negative volatility trade-off. Based on our results, it is apparent that some strategic equity indices outperform capital-weighted equity indices in a long-term investment perspective (1997-2018).
A suitable combination of strategic equity indices, namely the mix of dividend strategy and momentum strategy may lead to the highest yield / risk ratio expressed by the Sortino ratio. The outperformance path of a mix of dividends and momentum strategy indices is much more stable than either the performance of the individual strategy equity indices or capital-weighted equity indices alone.

Keywords: risk, return, equity indexes, semideviation, bootstrap, real-world data
Published online
2020-04-15
How to Cite
Novotná, V., Škapa, S. (2020) “Bootstrap Estimation of Expected Risk and Return of Strategy Equity Indices”, Periodica Polytechnica Social and Management Sciences, 28(2), pp. 111-120. https://doi.org/10.3311/PPso.13412
Section
Articles