Longitudinal review of portfolios with minimum variance approach before during and after the pandemic

TL;DR

This paper examines how the COVID-19 pandemic affected portfolio risk and return in the Colombian stock market, analyzing data from 2015 to 2023 with a focus on minimum variance portfolios before, during, and after the pandemic.

Contribution

It provides a longitudinal analysis of portfolio performance and risk metrics in Colombia, highlighting pandemic-related changes in risk and return dynamics.

Findings

Risk increased significantly during 2016-2020.

Portfolio returns decreased slightly during the pandemic period.

Sharpe index remained negative across all periods.

Abstract

This study investigates the impact of the pandemic on the most traded stocks in the Colombian stock market for the date of January 17, 2024. Based on the daily data of the most traded companies in Colombia for said date and covering a period general from 2015 to 2023, in a summarized way our analysis reveals that in the period 2015-2019, the return reached 5.70%, with a relatively low risk of 18.45%. However, in the following period 2016 -2020, although the yield decreased to 5.40%, the risk experienced a significant increase, reaching 24.64%. The beta also showed variations, being lowest in 2015-2019 with 0.61 and increasing to 1.02 in 2016-2020. The capital market line (LMC) in the constructed portfolios has a downward trend, indicating that the portfolio offers an expected rate of return lower than the risk-free rate. This finding is supported by the Sharpe index, which shows negative values throughout the periods studied.