Authors: Harshvardhan kuldeep pandey
Abstract: This research paper investigates the comparative performance of Risk Parity and Traditional Allocation approaches in emerging markets, with India and Brazil being the primary countries of focus. Although conventional approaches like the 60/40 equity-bond strategy are prevalent, they do not account for risk contribution as the governing philosophy. Risk Parity, however, distributes capital equally across all asset classes based on their risk contribution, providing a volatility-nimble approach. The research utilizes 2012-2024 historical returns and builds back-tested portfolios for the two strategies based on equities, bonds, and commodities. CAGR, Sharpe Ratio, volatility, and peak drawdown are used to measure each strategy's performance. The aim is to determine if Risk Parity delivers better risk-adjusted returns in politically risky, currency-volatile, and asymmetric growth in economies. Early evidence indicates Risk Parity provides more consistent performance in crisis times but lags in high-growth market booms. The article seeks to offer useful advice for institutional investors looking for portfolio resilience in emerging markets
DOI: https://doi.org/10.5281/zenodo.17142136
