It is often argued in defense of Risk Parity portfolios that they maximize the Sharpe ratio if their securities have identical Sharpe ratios and identical correlations. However, securities have neither identical Sharpe ratios nor this correlation structure. In realistic markets, Risk Parity...

In a recent article in the Financial Analysts Journal, Zvi Bodie [1995] uses a clever insurance paradigm as the justification for assessing stocks' risk as a function of the investment horizon. He concludes that stocks' risk increases monotonically with the investment horizon. This is...