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Robust Asset Allocation


  • R.H. Tütüncü
  • M. Koenig


This article addresses the problem of finding an optimal allocation of funds among different asset classes in a robust manner when the estimates of the structure of returns are unreliable. Instead of point estimates used in classical mean-variance optimization, moments of returns are described using uncertainty sets that contain all, or most, of their possible realizations. The approach presented here takes a conservative viewpoint and identifies asset mixes that have the best worst-case behavior. Techniques for generating uncertainty sets from historical data are discussed and numerical results that illustrate the stability of robust optimal asset mixes are reported. Copyright Kluwer Academic Publishers 2004

Suggested Citation

  • R.H. Tütüncü & M. Koenig, 2004. "Robust Asset Allocation," Annals of Operations Research, Springer, vol. 132(1), pages 157-187, November.
  • Handle: RePEc:spr:annopr:v:132:y:2004:i:1:p:157-187:10.1023/b:anor.0000045281.41041.ed
    DOI: 10.1023/B:ANOR.0000045281.41041.ed

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    References listed on IDEAS

    1. Hamiache, Gerard, 1999. "A Value with Incomplete Communication," Games and Economic Behavior, Elsevier, vol. 26(1), pages 59-78, January.
    2. Xavier Chojnicki & Lionel Ragot, 2011. "Impacts of Immigration on Aging Welfare-State An Applied General Equilibrium Model for France," Working Papers 2011-13, CEPII research center.
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    5. repec:spr:compst:v:47:y:1998:i:3:p:423-449 is not listed on IDEAS
    6. Sophie Dabo-Niang & Anne-Françoise Yao, 2013. "Kernel spatial density estimation in infinite dimension space," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 76(1), pages 19-52, January.
    7. Calvo, Emilio & Lasaga, Javier & van den Nouweland, Anne, 1999. "Values of games with probabilistic graphs," Mathematical Social Sciences, Elsevier, vol. 37(1), pages 79-95, January.
    8. William Thomson, 2001. "On the axiomatic method and its recent applications to game theory and resource allocation," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 18(2), pages 327-386.
    9. Gómez, D. & González-Arangüena, E. & Manuel, C. & Owen, G., 2008. "A value for generalized probabilistic communication situations," European Journal of Operational Research, Elsevier, vol. 190(2), pages 539-556, October.
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