The term structure of equity risk has been shown to be downward sloping. We capture this feature using return dynamics … observed timing of equity risk outperform those that do not, particularly so out of sample. Indeed, the mean (median) certainty … equivalent return increases from about 13% (12%) to about 21% (15%) because properly modeling the timing of equity risk implies …

We investigate portfolio diversification strategies based on hierarchical clustering. These hierarchical risk parity … strategies use graph theory and unsupervised machine learning to build diversified portfolios by acknowledging the hierarchical … lower tail dependence coefficient. Such innovation is expected to achieve better tail risk management in the context of …

This paper studies the aggregation of a downside risk measure introduced by Fishburn (1977). Properties of aggregated … downside risk are examined and compared to classical risk measures such as standard deviation and value-at-risk. The notion of … downside-efficient portfolios that maximize the expected payoff given a prescribed upper bound for downside risk is introduced …

We introduce a family of Capital allocation rules (C.A.R) based on the dual representation for risk measures and … inspired to the Aumann-Shapley allocation principle. These rules extend the one of Denault and Kalkbrener (for coherent risk … measures) and the one of Tsanakas (convex case), to the case of non Gateaux differentiable risk measures. We also study their …

I propose a simple time-series risk measure in trading stock market anomalies, CoAnomaly, the time-varying average …, CoAnomaly carries a negative price of risk. These return patterns suggest that arbitrageurs take the time-varying correlation …

We consider a portfolio optimization problem of the Black-Litterman type, in which we use the conditional value-at-risk … (CVaR) as the risk measure and we use the multi-variate elliptical distributions, instead of the multi-variate normal …

We show that the probability of risk parity beating any other portfolio is more than 50 percent. We also prove that if … portfolio performance is measured by Sharpe ratio, risk parity is the only maximin portfolio when (1) all assets' future Sharpe … assets' future Sharpe ratios is greater than some constant. If portfolio performance is measured by expected return, risk …

We propose a return based modification of the portfolio variance matrix for asset allocation using risk parity. The … modification is based upon a single scalar parameter which can be tuned to tailor the allocation for desired expected risk and …/or return. The present work contributes a new twist on risk parity. While classical risk parity methods are based exclusively on …

law of one price, and is present in all but risk-neutral economies. We test the cross-sectional predictions of our theory …Because levered equity is an option on the firm, variations in asset idiosyncratic risk (ivol) induces a negative … equity than for assets, and stronger for more levered firms — consistent with the theory. We test also the timeseries …

This paper investigates how the nature of risk changes as investment horizon lengthens, and what it means for investors … equities, bonds and cash may vary with horizon is also discussed, including highlighting why fixed income may not be a low risk …