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Strategic Portfolio Allocation

In: Capital Market Finance

Author

Listed:
  • Patrice Poncet

    (ESSEC Business School)

  • Roland Portait

    (ESSEC Business School)

Abstract

Dynamic portfolio strategies, as opposed to static or “buy and hold” ones, covers a wide variety of short-term and long-term management styles that can be classified according to different criteria. Strategic allocation concerns a small number of asset classes (typically stocks, bonds and monetary securities) and depends on the investors’ risk aversion and wealth. Its horizon is long, typically several years. The first approach of strategic allocation is the so-called common sense management rules (allocation according to age, risk profile…). The second approach is portfolio insurance, based on automatic rules and designed to hedge the portfolio against bearish conditions while partially benefiting from bullish conditions. The last one is Merton’s dynamic optimization model which theoretically allows the investor’s portfolio to be adapted at any time to their own objectives.

Suggested Citation

  • Patrice Poncet & Roland Portait, 2022. "Strategic Portfolio Allocation," Springer Texts in Business and Economics, in: Capital Market Finance, chapter 24, pages 991-1029, Springer.
    • Handle: RePEc:spr:sptchp:978-3-030-84600-8_24
    DOI: 10.1007/978-3-030-84600-8_24
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