# Risk Analysis of Passive Portfolios

**Authors:** Sourish Das  
**arXiv:** [2407.08332](https://arxiv.org/abs/2407.08332)  
**Date:** 2024-07-11  
**Summary page:** https://www.summarizepaper.com/en/paper/2407.08332v1/

## Key points

- Alternative passive investment strategy based on Efficient Market Hypothesis (EMH)
- Comparison of Nifty50 index volatility and extreme risk measures with Markowitz's optimal portfolio
- Proposal of an equal-weight portfolio as a solution to minimize idiosyncratic risk
- Empirical evidence showing similar risk profile to Markowitz's optimal portfolio
- Lower risk levels of equal-weight portfolio during idiosyncratic events like the Russian invasion of Ukraine
- Availability of study codes on GitHub for further exploration and analysis

## Summary

In the research paper "Risk Analysis of Passive Portfolios" by Sourish Das, an alternative passive investment strategy is presented based on the Efficient Market Hypothesis (EMH). The EMH suggests that actively managing a portfolio may not outperform the market in the long run, leading to the widespread adoption of passive investment strategies. The study focuses on the Nifty50 index in India and compares its volatility and extreme risk measures with Markowitz's optimal portfolio. The analysis reveals that the Nifty50 portfolio carries higher risks compared to an optimized portfolio. To address this, the study proposes an equal-weight portfolio as an alternative passive investment strategy. By allocating equal weights to all stocks in the Nifty50 index, the idiosyncratic risk of the portfolio can be minimized. Empirical evidence shows that this approach results in a risk profile similar to Markowitz's optimal portfolio. Furthermore, the study examines how different portfolios perform during idiosyncratic events such as the Russian invasion of Ukraine. It is found that the equal-weight portfolio consistently exhibits lower risk levels compared to holding Nifty50 ETFs before and during such events. The research provides valuable insights for investors looking to optimize their passive investment strategies and manage risks effectively. All codes related to the study are available on GitHub for further exploration and analysis.