Long-horizon investors have traditionally assumed that they do not need to purchase insurance against rare but severe events that can adversely impact their portfolios. Even where insurance is justified, it is interpreted as a “cost” that reduces the potential returns of the portfolio. In...

The risks embedded in asset-based risk parity portfolios are explored using a simple, economically motivated approach. Such an approach can go a long way toward demystifying and making more explicit the drivers of performance and risks of asset-based risk parity portfolios. Investors in risk...