# Tag Info

### How to construct a Risk-Parity portfolio?

I am very happy with the following equivalent formulation for the risk budgeting problem (as presented in Bruder, Roncalli, 2012, Managing Risk Exposures using the Risk Budgeting Apporach): Let $b_i$,...
Accepted

### Ledoit/Wolf covariance shrinkage in risk-parity optimisation

The Risk Parity portfolio will be equal weighted if the assets have uniform correlation and equal variance. This would be the case for the shrunk covariance matrix if the shrinkage coefficient used ...

### Are smart beta and risk-parity the same?

This is a very good question. It can be argued that risk parity is one example of a smart beta strategy. Yet it is important to understand that both are coming from two different directions: risk ...

1 vote

### How were Dalio's All Weather weights determined?

What horizon are you using to calculate your "equal risk contribution" weights? I am guessing it's 1 year, maybe 5 year... versus Dalio looking over decades. Plus, where are TIPS? When the Taper ...
1 vote

### How to construct a risk parity Portfolio by fixing the portfolio volatility on a desired level?

your goal is to find the weight vector, $w$, which minimized your "utility" function $\sum_{i}^{N} [\frac{\sqrt{w^{T}\Sigma w}}{N} - w_i\cdot c(w_i))] ^{2}$. A general approach is to use gradient ...
1 vote

### Equal Risk Contribution portfolio scipy optimization not working

I figured out the issue, in the risk_budget_objective_error(weights,*args) function, I used pre-defined variables to figure calculate portfolio_stdev and ...
1 vote
Accepted

### Equal Risk Contribution portfolio scipy optimization not working

Further to my comment is it because your functions are returning matrix's which are deprecated? Why not re-write your functions using ndarrays; ...
1 vote

### Are smart beta and risk-parity the same?

I think this paper gives a really good overview about risk parity link. As it points out, risk parity is a alternative to traditional mean variance portfolio construction.
1 vote

### Are smart beta and risk-parity the same?

Smart Beta refers a trend in making well known quantitative strategies more accessible to investors. Simple examples for equities include Value, Momentum, Quality, and Low Volatility. Fixed income ...
1 vote

### Are smart beta and risk-parity the same?

They are not the same as in they are equal, but risk parity can be considered a smart beta strategy. Smart beta is this opaque term that covers anything that can be put into a factor, regressed ...

Only top scored, non community-wiki answers of a minimum length are eligible