Demystifying Risk Parity

36 Pages Posted: 19 Jan 2012 Last revised: 22 Jan 2012

See all articles by Hakan Kaya

Hakan Kaya

Neuberger Berman

Wai Lee

Neuberger Berman

Date Written: January 9, 2012

Abstract

Most analysis of risk parity treats it as a heuristic and compares backtests of different allocation methods with less emphasis on investment rationale. The authors investigate risk parity under different settings, highlight its potential utility, and give insights into when this method may be expected to perform better by conducting path independent controlled simulation experiments.

Keywords: Risk parity

Suggested Citation

Kaya, Hakan and Lee, Wai, Demystifying Risk Parity (January 9, 2012). Available at SSRN: https://ssrn.com/abstract=1987770 or http://dx.doi.org/10.2139/ssrn.1987770

Hakan Kaya (Contact Author)

Neuberger Berman ( email )

United States

Wai Lee

Neuberger Berman ( email )

United States

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