Recently, an alternative stochastic programming model with simulated paths was proposed by Hibiki [N. Hibiki, A hybrid simulation/tree multi-period stochastic programming model for optimal asset allocation, in: H. Takahashi, (Ed).
A hybrid simulation/tree stochastic optimization model for dynamic asset allocation.
A hybrid simulation/tree multi-period stochastic programming model for optimal asset allocation.
The Japanese Association of Financial Econometrics and Engineering, JAFFE Journal (2001) 89 119 (in Japanese); N. Hibiki A hybrid simulation/tree stochastic optimization model for dynamic asset allocation, in: B. Scherer Edd)., Asset and Liability Management Tools: A Handbook for Best Practice, Risk Books, 2003, pp. 269 294], which was called a hybrid model.
He has developed macro-models of fixed income, valuation models with time-varying expected returns, models of downside risk and other non-linearities in asset returns, and models of dynamic asset allocation.
And his "charitable asset allocation" model is worth emulating.
While you'd be right to favor stocks in any asset allocation model (they tend to perform better over the long haul), you also need diversity.
This paper presents a new asset allocation model based on the CVaR risk measure and transaction costs.
Mr. Lockwood, who is a lawyer and a certified financial planner, said that once the asset allocation model is determined, investors should look at the different segments of the bond market, consider their risk tolerance and select funds that are likely to meet their income goals.
You have a signal called the Annual Asset Allocation Model.
