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Risk versus Momentum-based Equity Allocations

Which strategy prevails?

Nicolas Rabener
10 min read
21 Jul 2025

SUMMARY

  • Risk & momentum-based equity allocation strategies outperformed over the last 38 years
  • However, the outperformance diminished over a shorter lookback
  • Financial research is highly sensitive to assumptions like the lookback period

INTRODUCTION

A leading hedge fund manager recently released research promoting risk-based equity allocations as a way to reduce exposure to overpriced U.S. stocks. The study found that risk-weighting allocations across global markets outperformed the MSCI ACWI and even kept pace with the S&P 500 -while delivering a higher Sharpe ratio. Sounds great, right?

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