Showing 1 - 10 of 16
The concept of alternative risk premia is an extension of the factor investing approach. Factor investing consists in building long-only equity portfolios, which are directly exposed to common risk factors like size, value or momentum. Alternative risk premia designate non-traditional risk...
Persistent link: https://www.econbiz.de/10012967467
This article develops a model that takes into account skewness risk in risk parity portfolios. In this framework, asset returns are viewed as stochastic processes with jumps or random variables generated by a Gaussian mixture distribution. This dual representation allows us to show that skewness...
Persistent link: https://www.econbiz.de/10012986357
A capitalization-weighted index is the most common way to gain access to broad equity market performance. These portfolios are generally concentrated in a few stocks and present some lack of diversification. In order to avoid this drawback or to simply diversify market exposure, alternative...
Persistent link: https://www.econbiz.de/10013133707
Portfolio construction and risk budgeting are the focus of many studies by academics and practitioners. In particular, diversification has spawn much interest and has been defined very differently. In this paper, we analyze a method to achieve portfolio diversification based on the decomposition...
Persistent link: https://www.econbiz.de/10013100035
Although portfolio management didn't change much during the 40 years after the seminal works of Markowitz and Sharpe, the development of risk budgeting techniques marked an important milestone in the deepening of the relationship between risk and asset management. Risk parity then became a...
Persistent link: https://www.econbiz.de/10013081193
In this paper we propose a coordinate descent algorithm for solving high dimensional risk parity problems. We show that this algorithm converges and is very fast even with large covariance matrices (n500). Comparison with existing algorithms also shows that it is one of the most efficient...
Persistent link: https://www.econbiz.de/10013076242
In this article, we show how to take into account skewness risk in portfolio allocation. Until recently, this issue has been seen as a purely statistical problem, since skewness corresponds to the third statistical moment of a probability distribution. However, in finance, the concept of...
Persistent link: https://www.econbiz.de/10012898975
Risk parity is an allocation method used to build diversified portfolios that does not rely on any assumptions of expected returns, thus placing risk management at the heart of the strategy. This explains why risk parity became a popular investment model after the global financial crisis in...
Persistent link: https://www.econbiz.de/10013063057
Like ESG investing, climate change is an important concern for asset managers and owners, and a new challenge for portfolio construction. Until now, investors have mainly measured carbon risk using fundamental approaches, such as with carbon intensity metrics. Nevertheless, it has not been...
Persistent link: https://www.econbiz.de/10013247788
The ongoing economic crisis has profoundly changed the industry of the asset management, by putting risk management at the heart of most investment processes. This new risk-based investment style does not rely on returns forecasts and is therefore assumed to be more robust. In 2011, it has...
Persistent link: https://www.econbiz.de/10013110298