Leverage Aversion and Risk Parity

Clifford Asness, Andrea Frazzini, Lasse Heje Pedersen

Publikation: Bidrag til tidsskriftTidsskriftartikelpeer review

Abstrakt

The authors show that leverage aversion changes the predictions of modern portfolio theory: Safer assets must offer higher risk-adjusted returns than riskier assets. Consuming the high risk-adjusted returns of safer assets requires leverage, creating an opportunity for investors with the ability to apply leverage. Risk parity portfolios exploit this opportunity by equalizing the risk allocation across asset classes, thus overweighting safer assets relative to their weight in the market portfolio.
OriginalsprogEngelsk
TidsskriftFinancial Analysts Journal
Vol/bind68
Udgave nummer1
Sider (fra-til)47-59
ISSN0015-198X
StatusUdgivet - 2012

Emneord

  • Capital assets pricing model
  • Risk assessment
  • Capitalists & & financiers
  • Rate of return
  • Risk premiums
  • Investments
  • Success

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