Title

Mostly Prior-Free Asset Allocation

Author(s)

Sylvain Chassang Sylvain Chassang (Princeton University)

Abstract

This paper develops a prior-free version of Markowitz (1952)’s efficient portfolio theory that allows the decision maker to express preferences over risk and reward, even though she is unable to express a prior over potentially non-stationary returns. The corresponding optimal allocation strategies are admissible, interior, and exhibit a form of momentum. Empirically, prior-free efficient allocation strategies successfully exploit time-varying risk premium present in historical returns.

Creation Date

2016-01

Section URL ID

Paper Number

077_2016

URL

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwjJmoqAx6PvAhUeEFkFHc2KD1kQFjAAegQIAhAD&url=https%3A%2F%2Fwww.risk.net%2Fmedia%2Fdownload%2F968236%2Fdownload&usg=AOvVaw0VtbqMX90eGGEaVRlMnA9t

File Function

Jel

G11

Keyword(s)

prior-free portfolios, non-stationary returns, time-varying risk premium, fear-of-missing out, fear-of-loss, regret aversion, drawdown frontier

Suppress

false

Series

10