Diversifying Risk Parity

23.07.2014

Empirische Kapitalmarktforschung, Risk & Optimization

Deka Invesmtent GmbH (2012)

Keywords

  • Diversification
  • Entropy
  • Risk parity
  • Risk-based asset allocation

Autoren

Lohre, Dr. Harald Opfer, Dr. Heiko Ország, Dr. Gábor

Abstract

Striving for maximum diversification we follow Meucci (2009) in measuring and managing a multi-asset class portfolio. Under this paradigm the maximum diversification portfolio is equivalent to a risk parity strategy with respect to the uncorrelated risk sources embedded in the underlying portfolio assets. Our paper characterizes the mechanics and properties of this diversified risk parity strategy. Moreover, we explore the risk and diversification characteristics of traditional risk-based asset allocation techniques like 1/N, minimum-variance, risk parity, or the most-diversified portfolio and demonstrate the diversified risk parity strategy to be quite meaningful when benchmarked against these alternatives.

Weiterführende Informationen