Chapter 17: Portfolio Construction
Risk Contribution, Risk Parity, and Why Capital Weights Mislead advanced
"Diversification is the only free lunch in finance" — but a portfolio that spreads capital equally can still concentrate nearly all its risk in one or two positions.
"Diversification is the only free lunch in finance" — but a portfolio that spreads capital equally can still concentrate nearly all its risk in one or two positions.
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References
Value and Momentum Everywhere
Clifford S. Asness, Tobias J. Moskowitz, Lasse Heje Pedersen
(2013)
— The Journal of Finance
On the Properties of Equally-Weighted Risk Contributions Portfolios
Sébastien Maillard, Thierry Roncalli, Jerome Teiletche
(2008)
— SSRN Electronic Journal
An Overview of Optimization Models for Portfolio Management
Jang Ho Kim, Yongjae Lee, Woo Chang Kim, Taehyeon Kang, Frank J. Fabozzi
(2024)
— The Journal of Portfolio Management