Mostly Prior-Free Asset Allocation

54 Pages Posted: 4 Feb 2016

See all articles by Sylvain Chassang

Sylvain Chassang

New York University (NYU) - Department of Economics

Date Written: January 18, 2016

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.

Keywords: prior-free portfolios, non-stationary returns, time-varying risk premium

Suggested Citation

Chassang, Sylvain, Mostly Prior-Free Asset Allocation (January 18, 2016). Princeton University William S. Dietrich II Economic Theory Center Research Paper No. 077_2016. Available at SSRN: https://ssrn.com/abstract=2727191 or http://dx.doi.org/10.2139/ssrn.2727191

Sylvain Chassang (Contact Author)

New York University (NYU) - Department of Economics ( email )

19 West 4th Street
New York, NY 10012
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
744
rank
32,239
Abstract Views
2,557
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information