Consumer Expenditure-Based Portfolio Optimization
This study examines whether portfolio optimization can be effectively based on annual changes in the harmonized index of consumer prices (HICP) data. Specifically, we assess whether asset allocation based on consumer expenditure can generate superior returns compared to static or equal-weighted asse...
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| Language: | English |
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MDPI AG
2025-06-01
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| Series: | International Journal of Financial Studies |
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| Online Access: | https://www.mdpi.com/2227-7072/13/2/99 |
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| author | Attila Bányai Tibor Tatay Gergő Thalmeiner László Pataki |
| author_facet | Attila Bányai Tibor Tatay Gergő Thalmeiner László Pataki |
| author_sort | Attila Bányai |
| collection | DOAJ |
| description | This study examines whether portfolio optimization can be effectively based on annual changes in the harmonized index of consumer prices (HICP) data. Specifically, we assess whether asset allocation based on consumer expenditure can generate superior returns compared to static or equal-weighted asset allocation. To explore this, we use consumer expenditure data from HICP statistics categorized by COICOP. Our findings indicate that this strategy outperforms a buy-and-hold benchmark by 13.32% in terms of the Sharpe Ratio and exceeds an annual equal-weighted rebalancing strategy by 3.11%. Additionally, both the Calmar and Sterling Ratios demonstrate improved performance, further reinforcing the robustness of this approach. Furthermore, a hypothetical scenario where sector weights from the end of the given year—though not yet available during the year—are used suggests even greater improvements in performance. A high-sample bootstrap simulation confirms that the observed performance differences are not random but reflect the independent effectiveness of asset allocation based on consumer expenditure trends. This result strengthens the validity of our backtesting findings, indicating that the examined strategy could generate excess returns compared to passive portfolio managment and fixed-weight rebalancing approaches. The result of the study is therefore the development of an effective portfolio rebalancing strategy. |
| format | Article |
| id | doaj-art-6423b5bed8ca4b2f8d11546b6985de8c |
| institution | OA Journals |
| issn | 2227-7072 |
| language | English |
| publishDate | 2025-06-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | International Journal of Financial Studies |
| spelling | doaj-art-6423b5bed8ca4b2f8d11546b6985de8c2025-08-20T02:21:12ZengMDPI AGInternational Journal of Financial Studies2227-70722025-06-011329910.3390/ijfs13020099Consumer Expenditure-Based Portfolio OptimizationAttila Bányai0Tibor Tatay1Gergő Thalmeiner2László Pataki3Doctoral School of Economic and Regional Sciences, Hungarian University of Agriculture and Life Sciences, Páter Károly str. 1, H-2100 Gödöllő, HungaryDepartment of Statistics, Finances and Controlling, Széchenyi István University, Egyetem square 1, H-9026 Győr, HungaryDepartment of Investment, Finance and Accounting, Hungarian University of Agriculture and Life Sciences, Páter Károly str. 1, H-2100 Gödöllő, HungaryDoctoral School of Management and Business Administration, John von Neumann University, Infopark sétány 1, H-1117 Budapest, HungaryThis study examines whether portfolio optimization can be effectively based on annual changes in the harmonized index of consumer prices (HICP) data. Specifically, we assess whether asset allocation based on consumer expenditure can generate superior returns compared to static or equal-weighted asset allocation. To explore this, we use consumer expenditure data from HICP statistics categorized by COICOP. Our findings indicate that this strategy outperforms a buy-and-hold benchmark by 13.32% in terms of the Sharpe Ratio and exceeds an annual equal-weighted rebalancing strategy by 3.11%. Additionally, both the Calmar and Sterling Ratios demonstrate improved performance, further reinforcing the robustness of this approach. Furthermore, a hypothetical scenario where sector weights from the end of the given year—though not yet available during the year—are used suggests even greater improvements in performance. A high-sample bootstrap simulation confirms that the observed performance differences are not random but reflect the independent effectiveness of asset allocation based on consumer expenditure trends. This result strengthens the validity of our backtesting findings, indicating that the examined strategy could generate excess returns compared to passive portfolio managment and fixed-weight rebalancing approaches. The result of the study is therefore the development of an effective portfolio rebalancing strategy.https://www.mdpi.com/2227-7072/13/2/99consumer basketdiversificationportfolio optimizationharmonized index of consumer prices (HICP)Sharpe ratio |
| spellingShingle | Attila Bányai Tibor Tatay Gergő Thalmeiner László Pataki Consumer Expenditure-Based Portfolio Optimization International Journal of Financial Studies consumer basket diversification portfolio optimization harmonized index of consumer prices (HICP) Sharpe ratio |
| title | Consumer Expenditure-Based Portfolio Optimization |
| title_full | Consumer Expenditure-Based Portfolio Optimization |
| title_fullStr | Consumer Expenditure-Based Portfolio Optimization |
| title_full_unstemmed | Consumer Expenditure-Based Portfolio Optimization |
| title_short | Consumer Expenditure-Based Portfolio Optimization |
| title_sort | consumer expenditure based portfolio optimization |
| topic | consumer basket diversification portfolio optimization harmonized index of consumer prices (HICP) Sharpe ratio |
| url | https://www.mdpi.com/2227-7072/13/2/99 |
| work_keys_str_mv | AT attilabanyai consumerexpenditurebasedportfoliooptimization AT tibortatay consumerexpenditurebasedportfoliooptimization AT gergothalmeiner consumerexpenditurebasedportfoliooptimization AT laszlopataki consumerexpenditurebasedportfoliooptimization |