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Exhibiting Abnormal Returns Under a Risk Averse Strategy

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Abstract

This paper is devoted to the investment strategies that combine asset pricing models and coherent risk measures. In particular, we utilize the theoretical framework of Balbas et al. (J Risk 18(4):25–52, 2016), which suggests that simply by managing a portfolio of assets, an investor can achieve risk that converges to −∞ and returns that converge to + ∞. We contribute on that framework by providing evidence that arise from the CAPM model, in regard to the efficient market hypothesis. In addition, our results suggest that an investor can exhibit returns that outperform the market index by managing a portfolio less volatile than the market.

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Acknowledgements

The authors express their gratitude to the editor and the anonymous referees for their significant comments.

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Authors and Affiliations

  1. Department of Statistics and Actuarial-Financial Mathematics, University of the Aegean, Karlovassi, GR-83 200, Samos, Greece

    Dimitrios G. Konstantinides & Georgios C. Zachos

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  1. Dimitrios G. Konstantinides
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  2. Georgios C. Zachos
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Correspondence to Dimitrios G. Konstantinides.

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Konstantinides, D.G., Zachos, G.C. Exhibiting Abnormal Returns Under a Risk Averse Strategy. Methodol Comput Appl Probab 21, 551–566 (2019). https://doi.org/10.1007/s11009-018-9673-9

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  • DOI: https://doi.org/10.1007/s11009-018-9673-9

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