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.
115
questions
2
votes
1answer
48 views
Fama French regression with dummy variable
I am looking to run Fama-French regression on a portfolio of stocks.
I am looking to specify a regime using a dummy variable.
This dummy variable could be a low volatility/ high volatility marker.
...
2
votes
2answers
158 views
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 ...
2
votes
2answers
140 views
How to evaluate Asset Allocation skill?
There have been studies that show that Asset Allocation can explain 90% of the variance of returns on a portfolio. If true and Asset Allocation is the primary driver of return risk, how can you ...
0
votes
0answers
42 views
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 ...
0
votes
0answers
26 views
Minimize Composite Dispersion
Let's say that we have a composite of 10 fixed income portfolios, each with the same benchmark, the US Aggregate. Additionally, let's say that each portfolio has a position in Corporation ABC. The ...
2
votes
2answers
77 views
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 ...
2
votes
0answers
40 views
How to reduce a covariance matrix after clustering?
I have an N = 100 covariance matrix. I am clustering the covariance matrix say into 5 clusters.
How can I compute the reduced ...
1
vote
1answer
104 views
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 ...
0
votes
0answers
49 views
Calculating the eigenvector centrality of a portfolio described by a minimum spanning tree
I am working with the eigenvector centrality of a minimum spanning tree, which can be calculated as:
v(i) = lambda^-1 * sum[Omega(i,j)*v(j)]
where:
...
2
votes
1answer
77 views
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 ...
-1
votes
1answer
102 views
Capital Allocation, VaR, Expected Shortfall
Are there any serious drawbacks / weaknesses in the Euler allocation method, when used to allocate VaR capital (and potentially Expected Shortfall) to risk factors in a portfolio? I notice that ...
4
votes
3answers
472 views
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 ...
0
votes
1answer
51 views
I have missing data on my portfolio weightings but it can be solved through stock prices - how can I code to find this? [closed]
firstly I would like to say sorry for the title - its not the best. In fact its crap.
Here is my problem (I am new to coding btw - still learning)
I am using Python on my MacBook - using Terminal.
I ...
1
vote
0answers
316 views
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|...
3
votes
1answer
201 views
ETF pricing papers
May I request for research paper recommendations, if any, on existing models that study how the presence of ETFs affect equilibrium prices of the underlying assets?
I am exploring a project on a ...
4
votes
0answers
93 views
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 ...
1
vote
2answers
45 views
Calculating the allocation of a fund given two correlated variables
Imagine this hypothetical situation: I have a time series of cumulative performance of a fund and two time series of equities that are highly correlated to them. I know that that this fund ONLY ...
1
vote
1answer
67 views
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 ...
0
votes
0answers
243 views
Decomposition of Contribution to Variance
$C$ is a $N\times N$ covariance matrix of stock returns. Assuming $w$ is a vector of positions in each asset, the total variance of the portfolio is
$$w^TCw$$
The contribution to total variance of the ...
-1
votes
1answer
41 views
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 ...
2
votes
1answer
131 views
Kelly Criterion in correlated stocks
I would like to ask if there exist any mathematical proof or model which addresses how the Kelly criterion can be applied to find portfolio weights when the stocks are correlated.
1
vote
0answers
33 views
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 ...
2
votes
1answer
73 views
Trading Ranges for Tactical Asset Allocation
Do methods exist to determine trading ranges around benchmark weights/strategic asset allocation weights for a tactical asset allocation from the correlation structure between the individual asset ...
4
votes
1answer
93 views
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 ...
0
votes
1answer
63 views
Highest asset allocation contribution to the fund’s performance
I am preparing for 2020 May FRM II test and will appreciate any explanation for this question:
In terms of asset allocation contribution, why is real estate made the highest asset allocation ...
3
votes
2answers
335 views
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?
1
vote
1answer
154 views
Portfolio/sub-portfolio optimization
I have a finite amount of 26 assets, the total amount of these assets needs to be allocated to 9 portfolios. Each portfolio has its own required return which needs to be met, using a min-variance ...
6
votes
3answers
348 views
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 ...
0
votes
0answers
47 views
How long a time horizon should be for verifying the effectiveness of an investment strategy?
Question
To verify the effectiveness of a certain asset allocation strategy, how long a time horizon should be?
Is there any academic paper regarding this topic?
Question in more detial
I know ...
2
votes
1answer
239 views
How to calculate Information Ratio?
In the book titled "Active Portfolio Management: A Quantitative Approach for Producing Superior Returns and Controlling Risk" by Grinold & Kahn, the information ratio is defined as "the ratio of ...
0
votes
2answers
562 views
Strategic asset allocation research
I am currently trying to form an overall asset allocation strategy which combines base strategic allocation and tactical shifts. My model already incorporates the tactical shifts using various factors ...
4
votes
2answers
128 views
Optimal investment mix of equity and debt in a single company, HY vs IG
What is the optimal mix of equity and debt that an investor should invest in a single company?
If an investor invests in both the debt and equity of a company, they are in effect de-levering the ...
1
vote
1answer
501 views
Expanding window vs Rolling window z-score
I wish to find the z-score of a value measure( e/g P/E ratio) to compare them across asset classes, currently i am using an expanding window z-score to calculate the long-term mean and standard ...
1
vote
0answers
45 views
Crisis in in-sample period
I am backtesting a value momentum asset allocation strategy and my in sample period is from 2003 to 2011 and out sample from 2012 to 2019. I am optimising a cutoff for value on in sample to allocate ...
4
votes
1answer
121 views
Stress Testing approaches at Pension Funds/Asset Management companies
I am looking for resources on Stress Testing for non-banking institution, specifically for long term oriented Asset Management companies, Hedge Funds, Pension Funds, and other Investment companies. ...
2
votes
0answers
108 views
Residual Risk and Variance
I've solved part a, but am struggling with b and c. $x_m$ is the market portfolio vector, and I think $T$ should be a diagonal matrix. Any hints greatly appreciated!
3
votes
2answers
185 views
Multi-period portfolio allocation: Time-inconsistent approach
Consider a multi-period mean-variance portfolio optimization so that at time $t$ I find the strategy that maximizes my expected terminal wealth $X_T$, subject to a constraint on risk,
\begin{align*}
\...
2
votes
2answers
2k views
Implementing leveraged Risk Parity Portfolio using Direxion 3X ETF
The "common man" version of a leveraged Risk Parity portolio (40% stocks and 60% long term bond, Quarterly Rebalanced) can now be easily implemented using the 3X leveraged ETF's (UPRO=stocks, TMF=...
2
votes
0answers
141 views
Black-Litterman proof with P=I and Omega=tau*Sigma
Elsewhere on this site (link), Richard notes that
\begin{equation}
\Pi_{BL} = \frac{1}{2} \Pi + \frac{1}{2}Q,
\end{equation}
so long as we set $ P = I $ (where $I$ is the identity matrix) and $\Omega ...
1
vote
2answers
1k views
Compute allocation given long-short portfolio weights
The amount of capital allocated in each asset given long only weights is calculated as $allocation_i \ = K\cdot w_i$.
...
0
votes
2answers
4k views
How to calculate “portfolio cumulative return” from individual price data and weight of them?
I'm trying to run backtest in a vectorized way using Python Pandas and need to calculate a portfolio cumulative return from price data and weight of asset data.
I ...
1
vote
1answer
182 views
MPT Efficient portfolio /Asset allocation
When finding the optimal allocation using markovitz, the model will return '0' weights for assets that are "inefficient". What is the standard way for dealing with these weights if all assets have to ...
0
votes
1answer
176 views
Dynamic asset allocation strategies using a stochastic dynamic programming approach
I am currently reading Gerd Infanger's Chapter 5 on "Dynamic asset allocation strategies using a stochastic dynamic programming approach" in the Handbook of Asset and Liability Management edited by S....
0
votes
1answer
138 views
Preference between low (zero) and negative correlation
I am trying to create an artificial score grading user's portfolio correlation. In terms of diversification, lower correlation is obviously better. However, should negative correlation get a higher ...
1
vote
0answers
338 views
Problems with Black-Litterman: negative portfolio weights, and very poor returns
I am trying to implement the Black-Litterman model using own-defined views matrix (from consensus analysts). However, I have encountered the problems of negative portfolio weights in some periods, and ...
4
votes
2answers
823 views
Risk Parity / Equal Risk Contribution with Tail Risk Measures
Risk Parity or (synonymous) Equal Risk Contribution is an approach to portfolio construction which could work in theory with a broad class of risk measures. Yet, all references I have found so far ...
4
votes
1answer
524 views
Ledoit Wolf shrinkage with constant correlation prior with tawny and Riskporfolios
I am trying to use R to perform the shrinkage of covariance matrix towards constant correlation as defined in 'Honey, I Shrunk the Sample Covariance Matrix'.
I see there are two packages where this ...
2
votes
0answers
67 views
Looking for: List of 30 top-performing value investors in the US (AUM 100USD mn+; 10 years)
we are currently looking to build another database sourced by crawling the SEC (freely available at SimFin).
Our goal is to build a monthly updating database showing the holdings of the top value-...
1
vote
0answers
307 views
Mean Variance Optimization of 2000 pairs of securities (Python)
I would like to take the opportunity to ask for your help on an assignment I'm trying to complete.
For this 'Modern Robo Advisory' course we are asked to solve a (target) goal-based investment ...
3
votes
1answer
213 views
Why is this utility function not picking up its penalty?
I was reading this seminal paper by Infanger. On page 40, Figure 11. was quite interesting. In particular I was interested in the top one, 19 Years and I wanted to reproduce this plot. To give some ...
