The key trade-off among equity-risk-mitigation strategies is their expected return versus their ability to diversify equity risk. In particular, the more reliable a strategy’s equity-hedging properties, the lower its expected return, and vice versa. This article proposes a framework for optimal equity-risk-mitigation portfolio construction. In our model, the investor maximizes the portfolio’s unconditional expected return, subject to a constraint on its conditional equity beta. We show that the return to a risk-mitigation portfolio can be decomposed into hedging and return- generating components. We then demonstrate that optimal risk-mitigation portfolios exhibit better return-defensiveness properties relative to the underlying strategies. Disclosure: The authors report no conflicts of interest. Editor’s Note Submitted 17 June 2019 Accepted 14 April 2020 by Stephen J. Brown

中文翻译：

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构建股票风险缓解投资组合的框架

股权风险缓解策略之间的关键权衡是其预期回报与分散股权风险的能力。特别是，策略的股票对冲属性越可靠，其预期回报就越低，反之亦然。本文提出了一个优化股票风险缓解投资组合构建的框架。在我们的模型中，投资者最大化投资组合的无条件预期回报，受其条件股权贝塔的约束。我们表明，风险缓解投资组合的回报可以分解为对冲和产生回报的部分。然后，我们证明了最佳风险缓解投资组合相对于基础策略表现出更好的回报防御特性。披露：作者报告没有利益冲突。