Introducing spin-off stocks into the NSP’s risk parity strategy

Field lab: Nova Student Portfolio

This Field Lab Research will attempt to improve the Nova Student’s Portfolio’s (NSP) current investment strategy through the use of spin off stocks. Studies have shown that spin off issuances tend to outperform the broad market as they are inefficiently introduced into the marketplace. This research will try and draw upon this relative outperformance by introducing spin off securities into the NSP’s investment thesis. This shall be accomplished in two main ways: the first part of this research will focus more on the risk parity portion of the strategy as broad exposure to spin offs shall be introduced in an attempt to improve the current risk parity portfolio. The second part of this research will look to the stock picking aspect of the NSP’s strategy. In other words, an investment thesis will be introduced with the objective of picking out certain spin off opportunities. The main objective of this research will be to increase the Sharpe ratio of the entire strategy and the average annual return of the portfolio.