Asset Allocation. William Kinlaw. Читать онлайн. Newlib. NEWLIB.NET

Автор: William Kinlaw
Издательство: John Wiley & Sons Limited
Серия:
Жанр произведения: Ценные бумаги, инвестиции
Год издания: 0
isbn: 9781119817727
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any further by changing the allocation between stocks and bonds. We have maximized our objective function.

we identify mixes of stocks and bonds for many levels of risk aversion, thus enabling us to construct the entire efficient frontier of stocks and bonds. Figure 2.1 shows the efficient frontier based on the expected returns, standard deviations, and correlations shown in Tables 2.1 and 2.2. All the portfolios along the efficient frontier offer a higher level of expected return for the same level of risk than the portfolios residing below the efficient frontier.

Graph depicts the efficient frontier.
Asset Classes Conservative (%) Moderate (%) Aggressive (%)
US Equities 15.9 25.5 36.8
Foreign Developed Market Equities 14.5 23.2 34.5
Emerging Market Equities 5.6 9.1 15.8
Treasury Bonds 15.5 14.3 0.0
US Corporate Bonds 11.4 22.0 8.9
Commodities 4.0 5.9 4.0
Cash Equivalents 33.2 0.0 0.0
Expected Return 6.0 7.5 9.0
Standard Deviation 6.8 10.8 15.2

      The composition of these portfolios should not be surprising. The conservative portfolio has nearly a 1∕3 allocation to cash equivalents.

      The Optimal Portfolio

      The final step is to select the portfolio that best suits our aversion to risk, which we call the optimal portfolio. As we discussed earlier in this chapter, the theoretical approach to identifying the optimal portfolio is to specify how many units of expected return we are willing to give up to reduce our portfolio's risk by one unit. We would then draw a line with a slope equal to our risk aversion and find the point of tangency of this line with the efficient frontier. The portfolio located at this point of tangency is theoretically optimal because its risk/return trade-off matches our preference for balancing risk and return.

Risk statistics for end of five years
Conservative (%) Moderate (%) Aggressive (%)
Probability of Loss (return below 0%) 2.5 6.7 10.8
1% Value at Risk 5.1 17.0 28.7