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Allocation of Portfolio Risk and Outside Options: Which is the Best Coalition Structure Value to Solve the Low-Risk Anomaly?

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  • Tobias Hiller

    (Department of Microeconomics, University Leipzig, Leipzig, Germany)

Abstract

In this paper, we enhance the application of coalition structure (CS) games to the distribution of portfolio risk across individual assets in a portfolio. In a recent paper, CS games were applied for the first time as a risk measure that takes into account the contributions of individual assets to portfolio risk and contributions to the risk of the stock market as a whole. We enhance this approach by using five values for CS games in a simulation study. In this simulation, it can be shown that using CS games has an even higher potential to solve the so-called low-risk puzzle than shown in previous literature.

Suggested Citation

  • Tobias Hiller, 2024. "Allocation of Portfolio Risk and Outside Options: Which is the Best Coalition Structure Value to Solve the Low-Risk Anomaly?," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 26(01), pages 1-13, March.
    • Handle: RePEc:wsi:igtrxx:v:26:y:2024:i:01:n:s0219198923500172
    DOI: 10.1142/S0219198923500172
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