Risk parity portfolios for selected measures of investment risk
Risk parity portfolios for selected measures of investment risk

Summary/Abstract: The risk is an important factor taken into account in the construction of each investment portfolios. Usually, portfolios are constructed in this way to minimize total risk of investment. Another approach is the selection of weights of individual stocks included in the portfolio so that the risk of the investment was equally distributed over all the components of portfolio. Such portfolios are called risk parity portfolios or equal risk contribution portfolios. In research carried out so far on the risk parity, the risk was measured only by the standard deviation. The main goal of this article is to introduce optimization models that will determine the risk parity portfolios for selected risk measures such as Gini’s mean difference and mean absolute deviation. Also in the article the results of empirical research concerning the practical implementation of proposed models are presented.

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