Questions tagged [asset-allocation]
An investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investors risk tolerance, goals and investment time frame.
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Why are strategic asset allocations and CMAs updated annually?
From what I understand, funds update their capital market assumptions for the next 10 years and accordingly their strategic asset allocations annually or on some regular basis. Is there any evidence ...
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Asset vs capital
In easy money 3 there is an example given about asset to capital ratio of a bank. I'm confused in two things.
The example: Say a bank has 100\$ in assets and 2$ in capital. If the asset value ...
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Measure of hedge efficacy or other means to compare hedging strategies?
Is there a measure of hedge efficacy or another means to compare hedging strategies? I have seen Institutional Investors take very different approaches to tail hedging.
On one extreme, I have seen ...
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What do the existence and parameters of an efficient investment tell you about the value of a risk-free return?
I'm working on an unassessed course problem,
Consider the following risky investments \begin{matrix}
\text{name} & \text{expected return} & \text{standard deviation of return} \\
A & 9\% &...
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Tail Risk Hedging for Public Pension Plan
Very simplistically, ERISA rules require corporate pension plans to use market rates to discount their liabilities. If interest rates go up, the value of their pension liabilities goes down. Since ...
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ML/DS in fixed income asset management
I am new to the topic but I would like to read papers/books/anything interesting to learn more how ML and data science is used in buy side Fixed income Asset management firms. Factor investing/signals/...
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What's the point of resampling?
Resampling is a popular method for portfolio optimization. We repeatedly draw samples from a distribution, compute the optimal mean-variance portfolio and finally average over all allocations.
However,...
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What would be the problem with this pairs trading allocation scheme?
I am new to pairs trading, and I have come up with an idea of how to allocate capital between the long and short leg of a pairs trade. I feel that there is a problem with it, and I want to figure out ...
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How to correctly use Fama-French factors (from investment portfolio perspective)?
I have several questions regarding Fama-French and other (for instance, BAB) equity return factors for practical purposes (portfolio construction, portfolio risk analysis, portfolio return analysis). ...
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What are the quantitative requirements to distinguish between asset classes?
What are the quantitative criteria to distinguish between asset classes? I ask this as many institutional investors are undergoing strategic and tactical asset class decisions at the moment. How ...
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Find k of n assets that "minimize" the correlation matrix
I'm trying to find an efficient way to select $k$ from $n$ risky assets that are the least correlated with each other. I know that I can perform a brute-force search of all $k$-sized combinations of ...
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Statistical methodology for proving the stability in time of asset allocation weights
I am comparing the set of weights obtained by the classical Markowitz allocation process with those of another asset allocation technique I have devised.
Markowitz's weights are unstable, as the ...
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How do I have to calculate the risk free rate of my two asset portfolio?
Good afternoon everyone!
I have a question regarding the risk free rate of my two asset portfolio. For my course, we have to create a two asset portfolio with the time frame of 2015-2020 with monthly ...
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Why is Robust Allocation a worthwhile problem?
As opposed to
Robust Bayesian Allocation solves
see https://hudson-and-thames-portfoliolab.readthedocs-hosted.com/en/latest/bayesian/robust_bayesian_allocation.html.
I don't get it. Why is this a ...
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Calculation of Market portfolio from efficient frontier
I have a specific Portfolio frontier. Can someone provides me with details about how can I calculate the market portfolio from the efficient frontier? I know that I have to draw the tangent line from ...
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Criteria for excluding an Asset Class from a Strategic Asset Allocation
While historically the return, volatility and correlation characteristics justified the inclusion of Sovereign Bonds (US Treasuries, European Central Bank Debt, etc) in Strategic Asset Allocation ...
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Asset Allocation with near zero rates
With central banks pegging interest rates to near zero rates, an argument could be made that the future distribution of interest rates and bond returns are not normally distributed. How has modern ...
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Portfolio Performance Attribution Using Carino Smoothing
I'm trying to conduct portfolio performance attribution using Carino smoothing, but it seems that the active returns do not match and I don't know why. Here is the example I use:
\begin{array} {|r|r|r|...
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Are heuristic portfolios efficient portfolios?
Markowitz's definition of an efficient portfolio is one that minimizes portfolio risk for a given level of expected return. He therefore calls portfolios along the efficient frontier "frontier ...
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Difference between Money management / Asset allocation / Portfolio optimisation
maybe an ill-posed question, please advise 🙂
What is the difference between the 3 concepts? They all seem about optimising some risk/reward ratio...
money management
asset allocation
portfolio ...
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How to build a portfolio following the Smart beta process by dividend? [closed]
I'm having trouble finding the method to track smart beta dividend management. I have an Excel file which contains the prices and the dividends of certain companies, and I want to build a portfolio ...
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Equivalent constructions of risk budgeted portfolios?
When building an ERC portfolio given covariance $S$, I am familiar with the approach in optimalPortfolio. It takes the risks of a given weight vector $(w_i * (S w)_i)$, divides it by total risk to get ...
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What are non-variance (non Markowitz) based theories of capital allocation between non-correlated assets?
A large amount of literature in finance accepts the standard deviation in return as if it were an accurate measure of "risk."
What are some other financial theories for how to allocate capital ...
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What does the concept "standard Markowitz approach" include?
Does "standard Markowitz approach" include only mean-variance approach or does it also include other approach such as minimum-variance approach?
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Is there a way to figure out "hot" strategies?
Apparently, short vol strategies have gotten crowded, according to the recent Bloomberg piece. When I read this, I thought how about factor based strategies -- value, growth, etc.? Aren't they ...
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