Abstract: “The objective of this work is to show how the risk-based portfolio construction techniques i.e. strategic asset allocation approaches without forecasts of expected returns reach different results depending on whether the investment universe of the stock market is divided on the basis of a geographic breakdown or in function of a sector breakdown, carried out in relation to the productive sectors to which the individual companies belong rather than according to the listing market. An empirical analysis, applied on the global equity market, is implemented by making use of the typical and most advanced statistical and financial evaluation measures. The results of this analysis show a significant preference for the sectorial criterion compared to the geographic one.”

Keywords: risk-based strategies, sector indices, geographic indices, risk parity, global minimum variance, equal weighting, maximum diversification.