Most analysis of risk parity treats it as a heuristic and compares backtests of different allocation methods with less emphasis on investment rationale. The authors investigate risk parity under different settings, highlight its potential utility, and give insights into when this method may be...

Risk parity has been considered a heuristic asset allocation method. In this paper, we show that, to the contrary, risk parity is a special case of a mean-risk type of a portfolio optimization problem with log-regularization to constrain weights. We show that log-regularization leads to a fund...