Mostly prior-free asset allocation

Sylvain Chassang
2018 Journal of Risk  
This paper develops a prior-free version of Markowitz (1952)'s efficient portfolio theory that allows the decision maker to express preferences over risk and reward, even though she is unable to express a prior over potentially non-stationary returns. The corresponding optimal allocation strategies are admissible, interior, and exhibit a form of momentum. Empirically, prior-free efficient allocation strategies successfully exploit time-varying risk premium present in historical returns.
doi:10.21314/jor.2018.396 fatcat:msw5yrm4ovft7fpl76vk7rveaa