IDEAS home Printed from https://ideas.repec.org/a/ris/aarumt/3611.html
   My bibliography  Save this article

A Low-Risk vs. Market-Based Portfolio in Equity Market: Evidence from Global Financial Crisis and Global Pandemic Crisis in Pakistan

Author

Listed:
  • Raza, Muhammad Wajid
  • Said, Bahrawar
  • Hassan, Ijaz

Abstract

The study tests the characteristics of a low-risk-based portfolio compared with a broader market-capitalization weighted portfolio (benchmark portfolio) in Pakistan Stock Exchange (PSX). This study considers all listed stocks at PSX as an investment universe. Low-risk stocks were assessed by measuring the idiosyncratic risk. Extensive back-tests were performed to compare the financial performance for 2005-2022. Results show that the market-capitalization-based portfolio outperforms the low-risk-based portfolio in terms of annualized returns. However, the latter significantly reduces the risk and leads to superior risk-adjusted performance. The low-risk portfolio indicates resilience to market turmoil and reduces the downside risk of the market portfolio. The risk-return relationship appears to be stronger in the case of idiosyncrasies. The effect of the GFC-2008 and the GPC-2020 are also investigated; the results indicate that a low-risk-based portfolio carries higher returns while the market capitalization portfolio carries relatively higher risk. Both individuals and institutional investors can enhance the risk-adjusted performance of their portfolios by adopting a low-risk-based strategy.

Suggested Citation

  • Raza, Muhammad Wajid & Said, Bahrawar & Hassan, Ijaz, 2024. "A Low-Risk vs. Market-Based Portfolio in Equity Market: Evidence from Global Financial Crisis and Global Pandemic Crisis in Pakistan," Audit and Accounting Review, University of Management and Technology, Lahore, Pakistan, vol. 4(2), pages 60-90.
    • Handle: RePEc:ris:aarumt:3611
    as

    Download full text from publisher

    File URL: https://journals.umt.edu.pk/index.php/aar/article/view/6455/2895
    File Function: Full text
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Low-Risk Portfolio; Market-based Portfolio; Performance Evaluation; Pakistan Stock Exchange (PSX);
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:aarumt:3611. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Asma Amantullah (email available below). General contact details of provider: https://edirc.repec.org/data/sbumtpk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.