External / January 19, 2021

Real economy portfolio: The market risk premium as a source of alpha

The disconnect between the stock market and the underlying economy has been hard to overlook. An equity portfolio that fails to reflect the economy will contain un-compensated risks and offer a lower Sharpe ratio than the true market portfolio.

In this talk Gerald Garvey, head of Asia-Pacific Research and co-head of Global Research Blackrock Systematic Active Equity. takes the perspective of an active equity manager to find unique alpha from a portfolio that is intentionally closer to the underlying economy than a cap weighted benchmark. The investment thesis is surprisingly straightforward; all that’s required is a premium for bearing economy-wide risks, as in the original CAPM.


  • Gerald Garvey, Head of Asia-Pacific Research and Co-Head of Global Research Blackrock Systematic Active Equity
  • Russ Wermers, Dean’s Chair in Finance, Robert H. Smith School of Business & Director, Center for Financial Policy





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