Moderna Teoria de Portfólios e Magic Formula: uma avaliação considerando os impactos da Covid-19

Abstract

The aim of this paper is to compare the profitability and the relationship between risk and return of two different stock investment portfolios: one referring to the Modern Portfolio Theory of Markowitz and the other following the Magic Formula model. The comparison seeks to identify the best performance of the portfolios in the pre-Covid-19 crisis period and during the onset of the pandemic. The conclusive results showed that the Brazilian stock market is still small when compared to other countries. Thus, a very restrictive methodology such as Magic Formula generates few options for the portfolio. The analyzes also suggest that due to the crisis, companies in essential services, such as electricity, are not considered for the Magic Formula, which hampered its performance during 2020. The fact that it is adjusted quarterly means that the portfolio following the Magic Formula does not benefit from the long-term investment.