Capital Allocation to Risky Assets推荐.pdfVIP

CHAPTER SIX Capital Allocation to Risky Assets THE PROCESS OF  constructing an overall investor preferences, we need insight into the portfolio requires you to: (1) select the com- nature of risk aversion. We characterize a per- position of the risky portfolio and (2) decide sonal utility function that provides a score for how much to invest in it, directing the the attractiveness of candidate overall portfo- remaining investment budget to a risk-free lios on the basis of expected return and risk. investment. The second step is called capital By choosing the portfolio with the highest allocation to risky assets. score, investors maximize their satisfaction Clearly, to decide on your capital allocation with their choice of investments; that is, they you need to know the risky portfolio and evalu- achieve the optimal allocation of capital to ate its properties. Can the construction of that risky assets. risky portfolio be delegated to an expert? An The utility model also reveals the appropri- affirmative answer is necessary for a viable ate objective function for the construction of investments management industry. A negative an optimal risky portfolio and thus explains answer would require every investor to learn and how an industry can serve investors with implement portfolio management for himself. highly diverse preferences without the need