Development of a minimum risk equity fund in the Philippines

• Main Author: Garcia, Nico Miguel N.
• Format: text
• Language: English
• Published: Animo Repository 2019
• Subjects: Stocks—Philippines; Portfolio management; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/6382; https://animorepository.dlsu.edu.ph/context/etd_masteral/article/13439/viewcontent/Development_of_a_Minimum_Risk_Equity_Fund2.pdf
• Institution: De La Salle University

There exist only limited financial products for the more risk-averse investors in the Philippines. This study developed the financial product, the Hurst-based Minimum Volatility Equity Fund (aka Min Vol Equity Fund), or the Minimum Risk Equity Fund, to give access to individuals or entities who wish to invest their portfolios in a more conservative fund. The study aimed to develop the Min Vol Fund through the stock selection process that utilized the covariance matrices for the co-movement of each constituent stock and through the measure known as the Hurst Exponent, which determined the long-term memory of a stock’s historical data for future concerns through Rescaled Range Analysis. Asset allocation was done through the calculation of the minimum risk through the Sequential Quadratic Programming iterative method. To conclude the development of the Hurst-based Minimum Risk Equity Fund, its volatility was determined and backtested across different years, 2015 to 2018. The volatility of the fund was then compared to its benchmark funds, and had successfully beaten them.