The impact of asset allocation strategy on portfolio performance: evidence from damascus securities exchange (dse)

Background: Investors and portfolio managers who intend to invest in stocks listed on Damascus Securities Exchange (DSE) should understand and evaluate the performance of portfolios constructed using different asset allocation strategies, which in turn helps them shape their allocation decision with this understanding in mind. The purpose of this paper is to investigate the impact of asset allocation strategy on portfolio performance. It compares the out-of-sample performance of mean-variance, minimum variance, equally weighted and market value weighted strategies. The study utilized Sharpe ratio as a proxy for performance measurement. Methods: This paper discusses first the background and literature related to asset allocation strategies’ performance comparison. Then, moves on to test the impact of four asset allocation strategies on portfolio performance of stocks listed on Damascus Securities Exchange (DSE) using bootstrapping technique as a robust inference method proposed by Ledoit et al. (2008). They suggest to construct a studentized time series bootstrap confidence interval for the difference of the Sharpe ratios and to declare the two ratios as significantly different if zero is not contained in the obtained interval. Results: Mean-variance, minimum variance, equally weighted and market value weighted strategies do not realize significantly different performance as measured by Sharpe ratio. Conclusion: The asset allocation strategy does not have an impact on portfolio performance of stocks listed on Damascus Securities Exchange (DSE).