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Asset allocation is the implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor's risk tolerance, goals and investment time frame. [1]
Asset pricing theory builds on this analysis, allowing MPT to derive the required expected return for a correctly priced asset in this context. Intuitively (in a perfect market with rational investors ), if a security was expensive relative to others - i.e. too much risk for the price - demand would fall and its price would drop correspondingly ...
An asset allocation is a financial road map that shows you where to put your money based on your own investment objectives, risk tolerance and time horizon.
The attribution analysis dissects the value added into three components: Asset allocation is the value added by under-weighting cash [(10% − 30%) × (1% benchmark return for cash)], and over-weighting equities [(90% − 70%) × (3% benchmark return for equities)]. The total value added by asset allocation was 0.40%.
Discover optimal asset allocation strategies at any age to balance growth and risk. Ask questions to work toward retirement asset allocation at any stage.
In finance, the Black–Litterman model is a mathematical model for portfolio allocation developed in 1990 at Goldman Sachs by Fischer Black and Robert Litterman.It seeks to overcome problems that institutional investors have encountered in applying modern portfolio theory in practice.
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