ASSET strongALLOCATIONstrong STRATEGY IN INVESTMENT PORTFOLIO CONSTRUCTION.pdfVIP

Ewa Dziwok Department of Applied Mathematics University of Economics in Katowice ASSET ALLOCATION STRATEGY IN INVESTMENT PORTFOLIO CONSTRUCTION – A COMPARATIVE ANALYSIS EWA DZIWOK Abstract The investment portfolio management process consists of an integrated set of steps to create an appropriate mixture of assets. Since it is highly depending on characteristics of the investor, it is possible to stress three main steps: plan- ning, execution and feedback. The most crucial part of portfolio management is the execution step during which a suitable portfolio is built. The procedure takes into account asset allocation, security analysis and clients’ requirements. The main aim of the article is to present and compare asset allocation procedures used today, such as mean-variance approach, Black–Litterman one and risk based strategies. Keywords: strategic asset allocation, investment policy. JEL classification: G11, D81 . Introduction The global financial crisis in 2007-2009 made investors to revisit their in- vestment policy because of the apparent under-diversification and risk control failure. A list of next generation solution is proposed to displace modern portfo- lio theory generally based on various versions of risk-based asset allocations. 1. Asset allocation Asset allocation could be defined as the process of sharing the portfolio into number of asset classes (Sharpe 1992, pp. 7-19). The general idea is to move the emphasis from the security level to the portfolio level. It is worth to mention that the procedure is not simply based on coincidental investment in different asset classes (e.g., stocks, bonds, gold, and real estate) but on finding a range of investments that perform differentl