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How to replicate the performance of a popular mutual fund using common factors?
There is a large number of flagship investment funds within the U.S. investment industry with assets under management in the billions, reflecting their broad adoption by investors. The JP Morgan Global Asset Allocation Fund (JPM GAA) for instance is one these funds with asset under management of more than 2.8 billions USD. That fund aims…
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Asset Allocation Versus Risk Allocation in Portfolio Construction PART 2: Risk Parity
As of Dec 28 2024 In a previous article, by decomposing the risk of a 60/40 we showed that there is some imbalance between the asset class weight and its contribution to the total risk. One other portfolio allocation method that can address that imbalance is the risk parity. Using the same data spanning a…
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Asset Allocation Versus Risk Allocation in Portfolio Construction
The search for consistent risk adjusted returns is one the of the key objectives for investors. To achieve this, they spend a lot of time and resources evaluating the right combination of diverse asset classes for inclusion in their portfolios. A popular investing approach which forms the classic building block of portfolio construction, has been…
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Risk contribution analysis
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