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<p>Amidst the ongoing financial turbulence, this study evaluates the performance of well-established long/short and 60/40 portfolios within a network of ETFs representing different investment styles (S&amp;P 500, value, growth, ESG, Sharia, high-dividend, momentum, high-beta, low-volatility, VIX futures). For this purpose, we undertake an in-depth analysis of volatility spillovers, utilizing sophisticated methodologies such as the time-varying parameter vector autoregressive (TVP-VAR), the extended joint connectedness, and R-squared measures. The sample period spans from December 1, 2015, to December 31, 2024, allowing for a comprehensive examination of the risk-mitigation contributions of long/short and 60/40 portfolios based on their neutrality within the broader market network. Under the TVP-VAR approach, both the long/short and 60/40 portfolios demonstrate resilience to market shocks, with the former exhibiting a stronger stabilizing effect. In contrast, the advanced methodological frameworks expose both portfolios as net volatility transmitters, thereby restricting their risk-reduction potential. A closer examination of their net dynamic behavior indicates that both portfolios display time-varying patterns in their ability to curtail risk. Thereby, our research shows that the risk-dampening gains of these portfolios are not inherent, but are conditional on specific market dynamics. This provides crucial insights for investors and policymakers, underscoring the importance of employing a multi-faceted, network-based analytical approach to accurately assess systemic risk and refine asset allocation strategies.</p>

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The systemic footprint: revisiting risk mitigation in long/short and 60/40 portfolios through network connectedness

  • 期刊论文

  • 发表日期：

    2026年1月7日

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  • Spyros Papathanasiou,
  • Anastasios Magoutas,
  • Drosos Koutsokostas

摘要

Amidst the ongoing financial turbulence, this study evaluates the performance of well-established long/short and 60/40 portfolios within a network of ETFs representing different investment styles (S&P 500, value, growth, ESG, Sharia, high-dividend, momentum, high-beta, low-volatility, VIX futures). For this purpose, we undertake an in-depth analysis of volatility spillovers, utilizing sophisticated methodologies such as the time-varying parameter vector autoregressive (TVP-VAR), the extended joint connectedness, and R-squared measures. The sample period spans from December 1, 2015, to December 31, 2024, allowing for a comprehensive examination of the risk-mitigation contributions of long/short and 60/40 portfolios based on their neutrality within the broader market network. Under the TVP-VAR approach, both the long/short and 60/40 portfolios demonstrate resilience to market shocks, with the former exhibiting a stronger stabilizing effect. In contrast, the advanced methodological frameworks expose both portfolios as net volatility transmitters, thereby restricting their risk-reduction potential. A closer examination of their net dynamic behavior indicates that both portfolios display time-varying patterns in their ability to curtail risk. Thereby, our research shows that the risk-dampening gains of these portfolios are not inherent, but are conditional on specific market dynamics. This provides crucial insights for investors and policymakers, underscoring the importance of employing a multi-faceted, network-based analytical approach to accurately assess systemic risk and refine asset allocation strategies.