Please use this identifier to cite or link to this item: http://arl.liuc.it/dspace/handle/2468/6819
Title: Asset allocation with nonnegative weights and lognormal portfolio returns
Authors: Buzzacchi, Luigi
Ghezzi, Luca
Issue Date: 2020
Publisher: Zant world press
Bibliographic citation: Buzzacchi Luigi, Ghezzi Luca (2020), Asset allocation with nonnegative weights and lognormal portfolio returns. In: International review of business research papers, vol. 16, n. 1, March 2020, p. 1-15. ISSN 1837-5685. E-ISSN 1832-9543.
Abstract: The stage of strategic asset allocation is the most important one in a process of portfolio management: asset classes are selected and target weights are set. Careful decision-making benefits from the computation of an efficient frontier. In this work, weights are nonnegative and rebalanced once a year; portfolio returns are time uncorrelated and lognormal. A novel sufficient condition is obtained, whereby efficient portfolios based on linear returns may turn into efficient portfolios based on logarithmic returns. If that is met, the efficient frontier based on logarithmic returns is upward sloping, stretching from a corner portfolio with global minimum-variance to a corner portfolio with global maximum-variance. Such a complementary efficient frontier allows a decision maker to forecast the long-term portfolio value. The null hypothesis of lognormal portfolio returns is also tested by using two different data sets. It is always rejected in the latter; it is either accepted or rejected in the former, depending on the specific efficient portfolio.
URI: http://arl.liuc.it/dspace/handle/2468/6819
Journal/Book: International review of business research papers
ISSN: 1837-5685
Appears in Collections:Contributo in rivista

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