The authors gauged the return-generating potential of four investment strategies: value weighted, 60/40 fixed mix, and unlevered and levered risk parity. They report three main findings: (1) Even over periods lasting decades, the start and end dates of a backtest can have a material effect on results; (2) transaction costs can reverse ranking, especially if leverage is used; and (3) a statistically significant return premium does not guarantee outperformance over reasonable investment horizons.

See comments and response on this article.

Author Information

Robert M. Anderson is professor of economics at the University of California, Berkeley.

Stephen W. Bianchi, CFA, is a PhD candidate in economics at the University of California, Berkeley.

Lisa R. Goldberg is professor of statistics at the University of California, Berkeley.

Related Topics

Users who read this article also read


Rate and Share