Introducing the Cluster-Momentum Portfolio in Alternative Risk Premia Investing

Berouz Fatemi, Alireza Kobravi, Duncan Larraz, Francesc Naya, Nils Tuchschmid

2025

Abstract

Managing alternative risk premia (ARP) portfolios is a challenging task, due to the complexities of these types of investments. In this article, we present a purely quantitative approach that relies on performance persistence among ARP strategies while ensuring diversification by classifying the ARP indices using unsupervised hierarchical clustering. This cluster-momentum portfolio shows a superior performance when compared to a set of internally built benchmarks and also of existing ARP asset manager funds. It seems that persistence in performance can be capitalized in ARP, while the clustering technique achieves its objective of risk-reduction due to portfolio diversification. Moreover, the cluster-momentum portfolio appears to be resilient to parameter modifications.

Paper Citation

in Harvard Style

Fatemi B., Kobravi A., Larraz D., Naya F. and Tuchschmid N. (2025). Introducing the Cluster-Momentum Portfolio in Alternative Risk Premia Investing. In Proceedings of the 7th International Conference on Finance, Economics, Management and IT Business - Volume 1: FEMIB; ISBN 978-989-758-748-1, SciTePress, pages 175-182. DOI: 10.5220/0013203400003956

in Bibtex Style

@conference{femib25,
author={Berouz Fatemi and Alireza Kobravi and Duncan Larraz and Francesc Naya and Nils Tuchschmid},
title={Introducing the Cluster-Momentum Portfolio in Alternative Risk Premia Investing},
booktitle={Proceedings of the 7th International Conference on Finance, Economics, Management and IT Business - Volume 1: FEMIB},
year={2025},
pages={175-182},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0013203400003956},
isbn={978-989-758-748-1},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 7th International Conference on Finance, Economics, Management and IT Business - Volume 1: FEMIB
TI - Introducing the Cluster-Momentum Portfolio in Alternative Risk Premia Investing
SN - 978-989-758-748-1
AU - Fatemi B.
AU - Kobravi A.
AU - Larraz D.
AU - Naya F.
AU - Tuchschmid N.
PY - 2025
SP - 175
EP - 182
DO - 10.5220/0013203400003956
PB - SciTePress