The Case for Long-Only Agnostic Allocation Portfolios

20 Pages Posted: 20 Jun 2019

See all articles by Pierre-Alain Reigneron

Pierre-Alain Reigneron

Capital Fund Management

Vincent Nguyen

Capital Fund Management

Stefano Ciliberti

Capital Fund Management

Philip Seager

Capital Fund Management

Jean-Philippe Bouchaud

Capital Fund Management

Date Written: June 12, 2019

Abstract

We advocate the use of Agnostic Allocation for the construction of long-only portfolios of stocks. We show that Agnostic Allocation Portfolios (AAPs) are a special member of a family of risk-based portfolios that are able to mitigate certain extreme features (excess concentration, high turnover, strong exposure to low-risk factors) of classical portfolio construction methods, while achieving similar performance. AAPs thus represent a very attractive alternative risk-based portfolio construction framework that can be implemented in different situations, with or without an active trading signal.

Keywords: portfolio construction, minimum variance, maximum diversification, sparsity

Suggested Citation

Reigneron, Pierre-Alain and Nguyen, Vincent and Ciliberti, Stefano and Seager, Philip and Bouchaud, Jean-Philippe, The Case for Long-Only Agnostic Allocation Portfolios (June 12, 2019). Available at SSRN: https://ssrn.com/abstract=3403154 or http://dx.doi.org/10.2139/ssrn.3403154

Pierre-Alain Reigneron (Contact Author)

Capital Fund Management ( email )

23 rue de l'Université
Paris, 75007
France

Vincent Nguyen

Capital Fund Management ( email )

23 rue de l'Université
Paris, 75007
France

Stefano Ciliberti

Capital Fund Management ( email )

23 rue de l'Université
Paris, 75007
France

Philip Seager

Capital Fund Management ( email )

23 rue de l'Université
Paris, 75007
France

Jean-Philippe Bouchaud

Capital Fund Management ( email )

23 rue de l'Université
Paris, 75007
France
+33 1 49 49 59 20 (Phone)

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