Dollars and Jens
Friday, December 19, 2003
Asset allocation
To what extent would it make sense to think of your asset allocation not in terms of fraction of assets in such and such a class, but covariance of assets in a class with the portfolio as a whole as a portion of variance of the portfolio? Insofar as diversification is viewed as a way to weather 6-sigma events, the former, conventional way does make a great deal of sense, and it might be confusing in some way to think of a positive long-bond allocation as comprising a negative portion of your assets.

Like so many of my ideas, this needs further baking. Or outright incineration.

Powered by Blogger