Enhancing portfolio resilience during crisis periods: Lessons from BRICS indices and multi asset strategies

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This paper uses Markowitz’s mean-variance model to construct an investment portfolio incorporating multiple assets – BRICS equity indices, Gold, crude oil, bonds, and cryptocurrencies. The optimally created risky portfolios outperform alternative portfolio optimization methods – the naive portfolio and the equal risk contribution portfolio; and established indices – the S&P 500 and the MSCI Emerging Equity Index in terms of metrics – adjusted Sharpe ratio, modified Sharpe ratio, and the modified Value at Risk. The findings are validated across different periods, including the COVID-19 period and the Russian invasion of Ukraine, including various in and out of sample periods. The findings highlight the benefits of portfolio diversity, mainly using BRICS indices, Gold, and Brent Crude oil, and challenge the notion of limited diversification benefits in BRICS indices found in previous studies. This paper further suggests the potential of emerging market bonds ETF as a diversification option during turbulent economic periods and highlights the limitations of cryptocurrencies in optimizing multi asset portfolios. By adopting the recommended multi asset portfolios, investors can enhance their risk-return trade-offs and achieve superior performance compared to the S&P500 and MSCI emerging indices. Lastly, the paper recommends future research opportunities in measuring portfolio performance and hedging strategies considering risk-adjusted return measurements, transaction expenses, and dynamic rebalancing techniques.

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    • Table 1. Variables used in the study
    • Table 2. Test of normality using Jarque-Bera test results: Period: 3/1/2018 to 14/6/2018
    • Table 3. Extract of descriptive statistics
    • Table 4. Yield of 10-year U.S. Treasury bond
    • Table 5. Recommended optimal risky portfolios
    • Table 6. Recommended equal risk contribution portfolios
    • Table 7. Portfolio evaluation as per Adjusted Sharpe Ratio
    • Table 8. Portfolio evaluation as per Modified Sharpe Ratio
    • Table 9. Portfolio evaluation as expected shortfall using modified Value at Risk (MVaR)
    • Conceptualization
      Nupur Gupta, Pradip Mitra, Bharath Supra
    • Data curation
      Nupur Gupta
    • Formal Analysis
      Nupur Gupta, Pradip Mitra
    • Investigation
      Nupur Gupta, Pradip Mitra
    • Methodology
      Nupur Gupta, Pradip Mitra
    • Project administration
      Nupur Gupta
    • Supervision
      Nupur Gupta
    • Validation
      Nupur Gupta
    • Writing – original draft
      Nupur Gupta, Pradip Mitra
    • Writing – review & editing
      Nupur Gupta, Bharath Supra
    • Visualization
      Pradip Mitra, Bharath Supra
    • Resources
      Bharath Supra
    • Software
      Bharath Supra
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Investment Management and Financial Innovations