Strategic Asset Allocation and Risk Attribution

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In this article, we propose a model for risk attribution that explains the difference between the risk of a portfolio and its strategic asset allocation.  A first version of the risk attribution model explains the changes in the risk profile by allocation, diversification and selection decisions.  The second version is more intuitive as it attributes the risk, first to tactical allocation decisions and, second to the stock picking.

Author: Philippe Gregoire, Ph.D., Orifval and Philippe Vandooren, GPMS

In this article, we propose a model for risk attribution that explains the difference between the risk of a portfolio and its strategic asset allocation.  A first version of the risk attribution model explains the changes in the risk profile by allocation, diversification and selection decisions.  The second version is more intuitive as it attributes the risk, first to tactical allocation decisions and, second to the stock picking.

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