|dc.description.abstract||This thesis takes a closer look on the Norwegian bond and stock market in the period 1998-
2012 and compares different portfolio allocations. The problem statement is as follows: “A
comparison of risk and return in portfolios of stocks and bonds in the Norwegian market
based on equal weighting, 60/40, mean-variance, and risk parity”
Applied relevant theory is the framework of modern portfolio theory and the mean-variance
optimization as well as the Sharpe ratio and the risk parity approach.
The portfolio construction and calculation of portfolio weights are obtained through the use of
Excel and the Problem Solver.
The results show that the naïve equal weighting portfolio and the 60/40 stock/bond portfolio
outperforms both the mean-variance and the risk parity portfolio. The mean-variance portfolio
realizes the highest Sharpe ratio in line with the objective of the methodology, followed by
the risk parity portfolio. Both portfolios realizes Sharpe ratios superior to the equal weighting
and 60/40 portfolios.
The risk parity portfolio has some interesting characteristics such as equal return correlation
to stocks and bonds making the portfolio truly diversified and not solely dependent on stock
or bond returns, and it has equal risk contribution to the portfolios total risk from both stocks
In the absence of leverage, however, the expected return of the risk parity portfolio and the
mean-variance portfolio is too low to be compelling for most investors. By applying leverage
to the risk parity portfolio or the mean-variance portfolio up to the naïve equal weighting or
traditional 60/40 portfolios risk-levels, an investor can theoretically achieve higher returns.
This depends, however, on the cost of leverage.||nb_NO
|dc.title||A comparison of four different diversification strategies in the Norwegian market with portfolios consisting of stocks and bonds : a comparison of risk and return in portfolios of stocks and bonds in the Norwegian market based on equal weighting, 60/40, mean-variance, and risk parity||nb_NO
|dc.title.alternative||En sammenligning av fire forskjellige diversifiseringsstrategier i det norske markedet med porteføljer bestående av aksjer og obligasjoner : en sammenligning av risiko og avkastning i porteføljer av aksjer og obligasjoner i det norske markedet basert på likevekting, 60/40, mean-variance, og risikoparitet||nb_NO