Extreme Risk Index beats traditional strategies in managing heavy-tailed assets.
The researchers analyzed stock data to compare different portfolio strategies. They found that using the extreme risk index (ERI) method outperformed traditional strategies like minimum variance and equally weighted portfolios for assets with heavy tails. The ERI strategy aims to minimize the chance of big losses in a portfolio by using advanced statistical techniques. This study suggests that ERI could be a valuable tool for managing portfolios with high-risk assets.