RT Journal Article
SR Electronic
T1 Enhancing Risk Parity by Including Views
JF The Journal of Investing
FD Institutional Investor Journals
SP 53
OP 68
DO 10.3905/joi.2017.26.4.053
VO 26
IS 4
A1 Daniel Haesen
A1 Winfried G. Hallerbach
A1 Thijs Markwat
A1 Roderick Molenaar
YR 2017
UL https://pm-research.com/content/26/4/53.abstract
AB Within the finance literature, there is an apparent gap between the inherent ignorance of expected returns of a risk parity approach on the one hand, and the assumed certainty of expected returns in a mean–variance approach on the other. The authors propose a portfolio selection framework that allows an investor to position herself between these two extremes. Depending on the confidence in one’s expected return estimates, the optimal portfolio will be tilted more toward the risk parity portfolio or the mean–variance portfolio. The authors illustrate the framework for an investor in an asset allocation context.TOPICS: Portfolio construction, statistical methods