SSRN Author: Omid ShakerniaOmid Shakernia SSRN Content
http://www.ssrn.com/author=1355836
http://www.ssrn.com/rss/en-usSat, 31 Dec 2016 01:02:40 GMTeditor@ssrn.com (Editor)Sat, 31 Dec 2016 01:02:40 GMTwebmaster@ssrn.com (WebMaster)SSRN RSS Generator 1.0REVISION: Efficient Algorithms for Computing Risk Parity Portfolio WeightsThis article presents two simple algorithms to calculate the portfolio weights for a risk parity strategy, where asset class covariance information is appropriately taken into consideration to achieve “true” equal risk contribution. Previous implementations of risk parity either used a naïve 1/vol solution, which ignores asset class correlations, or computed “true” risk parity weights using relatively complicated optimizations to solve a quadratic minimization program with nonlinear constraints. The two iterative algorithms presented require only simple computations and quickly converge to the optimal solution. In addition to the technical contribution, the authors compute the parity in portfolio “risk allocation” using the Gini coefficient, and confirm that portfolio strategies with parity in “asset class allocation” can actually have high concentration in its “risk allocation.”
http://www.ssrn.com/abstract=2117303
http://www.ssrn.com/1554648.htmlFri, 30 Dec 2016 14:21:34 GMTREVISION: A Framework for Examining Asset Allocation AlphaDespite the large body of literature on the importance of asset allocation as a primary determinant of portfolio performance, the definition of asset allocation “alpha” remains a poorly defined concept. In this article, we show that a portfolio’s total alpha can be decomposed into alpha from asset allocation and manager selection. The asset allocation alpha can then be further attributed to value-add from:
1) taking additional risk exposure relative to the policy portfolio,
2) exploiting the relative value differential between assets with similar risk exposures, and
3) timing the cyclicality in risk premia.
http://www.ssrn.com/abstract=2199099
http://www.ssrn.com/1554336.htmlWed, 28 Dec 2016 18:41:50 GMTREVISION: Risk Parity Portfolio vs. Other Asset Allocation Heuristic PortfoliosIn this article, the authors conduct a horse race between representative risk parity portfolios and other asset allocation strategies, including equal weighting, minimum variance, mean–variance optimization, and the classic 60/40 equity/bond portfolio. They find that the traditional risk parity portfolio construction does not consistently outperform (in terms of risk-adjusted return) equal weighting or a model pension fund portfolio anchored to the 60/40 equity/bond portfolio structure. However, it does significantly outperform such optimized allocation strategies as minimum variance and mean–variance efficient portfolios. Over the last 30 years, the Sharpe ratios of the risk parity and the equal-weighting portfolios have been much more stable across decade-long subperiods than either the 60/40 portfolio or the optimized portfolios. Although risk parity performs on par with equal weighting, it does provide better diversification in terms of risk allocation and thus warrants further ...
http://www.ssrn.com/abstract=1917064
http://www.ssrn.com/1554332.htmlWed, 28 Dec 2016 18:30:57 GMT