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<p>This study examines the impact of short-selling regulations on asset performance across three market regimes-pre-Covid-19 stability, the Covid-19 crisis, and the Ukraine–Russia war-with a focus on conventional and green assets. Using optimization techniques, we analyze VaR, variance, and Sharpe ratios under short-selling-allowed and restricted conditions. Key findings reveal that short-selling amplifies volatility, particularly in currencies and commodities, yet enhances risk-adjusted returns. Green assets demonstrate resilience, with climate indices like S&amp;P Global Clean Energy delivering stable Sharpe ratios (8.77% during the Ukraine war), rivaling traditional hedges. However, their performance varies-ESG assets thrive under short-selling bans, while others benefit from speculative liquidity. Policy implications advocate for calibrated short-selling measures such as circuit breakers to balance stability and efficiency, alongside targeted support for green finance, such as transparency reforms and incentives for sustainable ETFs. The study highlights the need for adaptive regulations tailored to asset-specific behaviors during crises, positioning green investments as viable portfolio stabilizers amid geopolitical and economic shocks.</p>

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Optimizing asset allocation in the COVID-19 era: curtailing variance and VaR while enhancing sharpe ratio across conventional and green assets

  • 期刊论文

  • 发表日期：

    2025年9月5日

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  • Indranarain Ramlall

摘要

This study examines the impact of short-selling regulations on asset performance across three market regimes-pre-Covid-19 stability, the Covid-19 crisis, and the Ukraine–Russia war-with a focus on conventional and green assets. Using optimization techniques, we analyze VaR, variance, and Sharpe ratios under short-selling-allowed and restricted conditions. Key findings reveal that short-selling amplifies volatility, particularly in currencies and commodities, yet enhances risk-adjusted returns. Green assets demonstrate resilience, with climate indices like S&P Global Clean Energy delivering stable Sharpe ratios (8.77% during the Ukraine war), rivaling traditional hedges. However, their performance varies-ESG assets thrive under short-selling bans, while others benefit from speculative liquidity. Policy implications advocate for calibrated short-selling measures such as circuit breakers to balance stability and efficiency, alongside targeted support for green finance, such as transparency reforms and incentives for sustainable ETFs. The study highlights the need for adaptive regulations tailored to asset-specific behaviors during crises, positioning green investments as viable portfolio stabilizers amid geopolitical and economic shocks.