The Risk in Risk Parity: A Factor-based Analysis of Asset-based Risk Parity
Posted: 25 Oct 2012 Last revised: 28 Dec 2016
Date Written: October 25, 2012
Abstract
The risks embedded in asset-based risk parity portfolios are explored using a simple, economically motivated approach. Such an approach can go a long way toward demystifying and making more explicit the drivers of performance and risks of asset-based risk parity portfolios. Investors in risk parity can use this approach for more robust portfolio construction and for benchmarking and differentiating various risk parity approaches.
Keywords: risk parity, asset allocation, risk factor parity
JEL Classification: G11
Suggested Citation: Suggested Citation
Bhansali, Vineer and Davis, Josh and Rennison, Graham and Hsu, Jason C. and Hsu, Jason C. and Li, Feifei, The Risk in Risk Parity: A Factor-based Analysis of Asset-based Risk Parity (October 25, 2012). Journal of Investing, Vol. 21, No. 3, Fall 2012, pp. 102-110, Available at SSRN: https://ssrn.com/abstract=2167058
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