This paper analyses whether the use of uncorrelated underlying risk factors, as opposed to correlated asset returns, can lead to a more efficient framework for measuring and managing portfolio diversification.

The paper, by academics at EDHEC Business School and SYMMYS, acknowledges that the ability to construct well-diversified portfolios is a challenge of critical importance in the context of designing good proxies for performance-seeking portfolios. It shows that a seemingly well-diversified allocation to asset classes may well result in a portfolio that is heavily concentrated in terms of factor exposures. In this context, it argues, it is of high relevance to measure and manage the effective number of bets in a portfolio.

 

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Risk Parity and Beyond – From Asset Allocation to Risk Allocation Decisions

 

White is responsible for the content across all Conexus Financial’s institutional media and events. In addition to being the editor of top1000funds.com, she is responsible for directing the bi-annual Fiduciary Investors Symposium.
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