Asset Allocation

The provision of investment services (and the correlated ancillary services) and collective investment services forms part of the main functions carried out by the securities industry. From an industrial point of view, all the activities defining the securities industry represent subsequent stages of the production process of the industry. The financial exchange sensu stricto uses the orders originating from the investment decisions produced in the asset allocation stages as input for the production process and, in turn, is divided into the order capture, order execution and order processing stages. The presence of banking intermediaries characterizes all the stages of the production process of the securities industry. This, of course, has implications in terms of profitability of the banking groups and affects their competitive strategies.

The present work overviews the application of recom-mender systems in various financial domains. The relevant literature is investigated based on two directions. First, a domain-based cate-gorization is discussed focusing on those recommendation problems, where the existing literature is significant. Second, the application of various recommendation algorithms and data mining techniques is summarized. The purpose of this paper is providing a basis for further scientific research and product development in this field.

In this paper we present an alternative approach to equity trading that is based on cointegration. If there are long-run equilibria among financial assets, a cointegration-based trading strategy can exploit profitable opportunities by capturing mean-reverting short-run deviations. We conduct an in-depth analysis of the factors that affect the optimal portfolio construction and we study the impact of these parameters on the portfolio performance. Under certain parameter specifications, an efficient tracking portfolio is able to produce similar patterns in terms of returns and volatility with the market. Enhancing this simple equity indexing application allows for the construction of market-neutral strategies. We find that a successful long-short strategy of two cointegration portfolios can yield an annualized return of more than 8%, outperforming the benchmark and also demonstrating insignificant correlation with the market. Even though some cointegration-based pairs-trading strategies can consistently generate significant cumulative profits, yet they do not seem to converge to risk-less arbitrages, and thus the hypothesis of market eciency cannot be rejected.

Security Analysis, Portfolio Management, and Financial Derivatives integrates the many topics of modern investment analysis. It provides a balanced presentation of theories, institutions, markets, academic research, and practical applications, and presents both basic concepts and advanced principles. Topic coverage is especially broad: in analyzing securities, the authors look at stocks and bonds, options, futures, foreign exchange, and international securities. The discussion of financial derivatives includes detailed analyses of options, futures, option pricing models, and hedging strategies. A unique chapter on market indices teaches students the basics of index information, calculation, and usage and illustrates the important roles that these indices play in model formation, performance evaluation, investment strategy, and hedging techniques. Complete sections on program trading, portfolio insurance, duration and bond immunization, performance measurements, and the timing of stock selection provide real-world applications of investment theory. In addition, special topics, including equity risk premia, simultaneous-equation approach for security valuation, and Itô's calculus, are also included for advanced students and researchers.

In questo E-Book sono trattati in maniera molto semplice i concetti base della Pianificazione Finanziaria.
Per investire in maniera consapevole il primo step è quello di conoscere quali sono gli obiettivi che vogliamo raggiungere per soddisfare i nostri bisogni e quelli della famiglia.
Solamente così siamo sicuri di ottenere il massimo dai nostri risparmi e investimenti.
I principali errori dei risparmiatori sono quelli di investire valutando solo il rendimento o il rischio, senza considerare che spesso cercare il rendimento significa prendere dei rischi eccessivi o stare al riparo dai rischi è un errore altrettanto grave perché si rinuncia al rendimento.
Pianificare gli investimenti in funzione dei propri bisogni permette al risparmiatore di non rinunciare al rendimento nel tempo e di essere al riparo dai rischi nel breve periodo.

This article provides evidence and analysis to show that a MAC (multi-asset-class) diversified portfolio performed well in mean-variance space and under varying market conditions, including the very adverse 2008 market crash. The portfolio also delivered during the two bull phases in the full period over which asset history existed. The construction of the covariance matrix for the efficient frontiers was independent of any return estimates or dynamic volatility-switching mechanisms. To abstract from hindsight bias, a 1/N equal-weighted portfolio was constructed and tested, consistent with some literature — it may still be the best alternative. In any case, the minimum-variance portfolios and the 1/N portfolio far exceeded the Sharpe ratio of the capitalization-weighted Russell 1000 equity index. The efficiency gains are potentially attributed to a lower overlap of the return-generating vectors, something that is not possible, to that extent, in an all-equity portfolio, irrespective of the extent of diversification in the non-negative space. Toward that, a scalar construct of overall dependencies called generalized variance is used as a measure of the overall spread within the covariance matrix. Two actual efficient frontiers are built with return data over the full length of the study and are tested for portfolio efficiencies. The dual return series has been implemented in the Returnfinder App, which produces Total Return charts that include dividends. Finally, with the objective of making such alternate asset and risk-allocation processes available to a wider set of investors, the portfolio components chosen to represent the low-correlation asset classes were among the most liquid index ETFs available on U.S. exchanges.

The rapid rise of “alternative” and non-listed asset classes has been one of the most remarkable phenomena in the institutional investment space since the start of the Great Recession 7 years ago. This trend is contributing to a profound transformation of the financial ecosystem as a whole. 
This unprecedented change is occurring against the backdrop of a growing disaffection for actively managed public equity, long the investment category of choice for institutional asset owners.

The authors provide a detailed study of the Swiss pension system, analyzing its strengths and weaknesses. The unfunded public pillar is highly redistributive. It has near universal coverage, a low dispersion of benefits (the maximum public pension is twice the minimum), and no ceiling on contributions. Low-income pensioners receive means-tested supplementary benefits. Payroll taxes are low, but government transfers cover 27 percent of total benefits. Total benefits amount to 9.1 percent of GDP, equivalent to 15.2 percent of covered earnings. The funded private pillar was made compulsory in a defensive move against the relentless expansion of the public pillar. The compulsory pillar stipulates minimum benefits in the form of age-related credits, a minimum interest rate on accumulated credits, and a minimum annuity conversion factor, aimed to smooth changes in interest rates over time. Low-income workers are not required to participate in the second pillar. The first and second pillar...

The Brazilian equity market is characterized by relatively low liquidity, high cost of capital (low firm valuation), and limited new capital raising. Ownership concentration of corporations is high, with large wedges between control and cash flow rights, leading to large differences in pricing of non-voting and voting shares, reflecting the risks of expropriation by insiders. In recent years, much of

We gauge the economic value of multivariate covariance estimators by assessing the risk-return performance of the resulting mean-variance efficient portfolios. A dynamic asset allocation framework is deployed, where the multivariate covariance forecasts compete against simpler nonparametric rivals widely used in the industry. A two-layer portfolio construction process for global asset allocation is developed to overcome the problem of handling large

The aim of this paper is to compare two asset allocation methods for a pension scheme during the decumulation phase in the simplified portfolio selection between a risky asset following a geometric Brownian motion and a riskless asset. The two asset allocation criteria are the ruin probability of the insurance company and the optimization of the economic capital. We first

One of the crucial aspects in asset allocation problems is the assumption concerning the probability distribution of asset returns. Financial managers generally suppose normal distribution, even if extreme realizations usually have an higher frequency than in the Gaussian case. The aim of this paper is to propose a general Monte Carlo simulation approach able to solve an asset allocation problem with shortfall constraint, and to evaluate the exact portfolio risk-level when managers assume a misspecified return behaviour. We assume that returns are generated by a multivariate skewed Student-t distribution where each marginal can have different degrees of freedom. The stochastic optimization allows us to value the effective risk for managers. In the empirical application we consider a symmetric and heterogeneous case, and interestingly note that a multivariate Student-t with heterogeneous marginal distributions produces in the optimization problem a shortfall probability and a shortfall return level that can be adequately approximated by assuming a multivariate Student-t with common degrees of freedom. Thus, the proposed simulation-based approach could be an important instrument for investors who require a qualitative assessment of the reliability and sensitivity of their investment strategies in the case their models could be potentially misspecified. Copyright © 2007 John Wiley & Sons, Ltd.

The Black-Litterman model introduces the concept
of market equilibrium as a starting point.
• In parallel, the investor forms views of relative value
portfolios and assigns an error term to his forecast
as well as a degree of confidence in each view.
• This provides a flexible, logical and consistent way
of deviating from the market benchmark.

This paper assesses the value of correlation dynamics in mean-variance asset allocation. A correlation-timing framework is deployed with state of the art models competing against industry correlation-updating rivals and static allocation strategies. We address the extent to which the superior statistical properties of multivariate conditional correlation models translate into enhanced investment performance. The success of the conditional correlation models is

This paper presents a new measure of skewness, skewness-aware deviation, that can be linked to prospective satisflcing risk measures and tail risk measures such as Value-at-Risk. We show that this measure of skewness arises naturally also when one thinks of maximizing the certainty equivalent for an investor with a negative exponential utility function, thus bringing together the mean-risk, expected utility,