The Uncertain Science of Asset Allocation
12 Pages Posted: 4 Jan 2000
Date Written: September 16, 1999
Abstract: Descriptive statistics for asset class return distributions are compared to inferential statistics produced by Monte Carlo simulations to illustrate that the assumption of normality and constant correlation can understate the risk associated with a given portfolio. Results are presented in a form accessible to students, investors, and practitioners alike. This working paper is to be part of a larger work illustrating investment uncertainty and the methods by which to deal with such uncertainty.
JEL Classification: D81, D84
Suggested Citation: Suggested Citation