Risk-Based Approaches to Asset Allocation (eBook)

Concepts and Practical Applications

Maria Debora Braga (Autor)

eBook Download: PDF

2015 | 1. Auflage
VIII, 103 Seiten
Springer-Verlag
978-3-319-24382-5 (ISBN)

Infos

This book focuses on the concepts and applications of risk-based asset allocation. Markowitz's traditional approach to asset allocation suffers from serious drawbacks when implemented. These mainly arise from the estimation risk associated with the necessary input the most critical being expected returns. With the financial crisis, there has been an increasing interest in asset allocation approaches that don't need expected returns as input, known as risk-based approaches. The book provides an analysis of the different solutions that fit this description: the equal-weighting approach, the global minimum-variance approach, the most diversified portfolio approach and the risk parity approach. In addition to a theoretical discussion of these, it presents practical applications in different investment environments. Three different evaluation dimensions are considered to put these approaches to the test: financial efficiency, diversification and portfolio stability.

Maria Debora Braga is Full Professor of Financial Markets and Institutions. She teaches at University of Valle d'Aosta and at SDA Bocconi School of Management. She received her Ph.D in Banking and Finance from Bocconi University and the M.Sc. in Business Administration from the University of Parma. She was Visiting Scholar at the University of London (Birkbeck College) during her Ph.D. and recently she has been Visiting Researcher at Cass Business School (City University London). She is a member of the Italian Scientific Committee of the European Financial Planning Association (€FPA). 

Inhalt

Contents 7
1 Introduction 9
2 The Traditional Approach to Asset Allocation 11
Abstract 11
2.1 A Short Review of the Traditional Markowitz Model for Asset Allocation 11
2.2 An Analysis of Markowitz's Portfolios: Drawbacks and Motivations 17
References 23
3 Risk-Based Approaches to Asset Allocation: The Case for Risk Parity 24
Abstract 24
3.1 The Distinguishing Characteristics of the Risk-Based Approaches 24
3.2 The Theoretical Background and Argument for Risk Parity 26
3.3 The Naïve Risk Parity Strategy 31
3.4 The Optimal Risk Parity Strategy 34
3.5 Risk Parity Strategy and Leverage 40
3.6 Risk Parity Strategy and the Modern Portfolio Theory Framework 43
3.7 Potential Evolution of Risk Parity Strategy 45
References 48
4 The Different Risk-Based Approaches to Asset Allocation 49
Abstract 49
4.1 Not Only Risk Parity, What Else? 49
4.2 The Equally-Weighted Approach 50
4.3 The Global Minimum-Variance Approach 53
4.4 The Most Diversified Portfolio Approach 56
References 61
5 Application of the Risk-Based Approaches to Asset Allocation 62
Abstract 62
5.1 Description of the Datasets Considered for Asset Allocation Experiments 62
5.2 Implementation of the Empirical Investigation 71
5.3 Methodology and Criteria for Evaluating the Risk-Based Approaches 76
5.4 Main Findings and Conclusions 83
References 95
Appendix Risk-Based Portfolio Compositions Across the Asset Allocation Experiments 97

Produkt-Details

• Erscheint lt. Verlag: 10.12.2015
• Reihe/Serie: SpringerBriefs in Finance
• Zusatzinfo: VIII, 99 p. 20 illus., 2 illus. in color.
• Verlagsort: Cham
• Sprache: englisch
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Unternehmensführung / Management
• Themenwelt: Wirtschaft ► Volkswirtschaftslehre
• Schlagworte: Asset Allocation • Minimum-variance Portfolio • Risk Contribution • Risk Parity • Weighted Portfolio
• ISBN-10: 3-319-24382-9 / 3319243829
• ISBN-13: 978-3-319-24382-5 / 9783319243825