Robust Asset Allocation

  title={Robust Asset Allocation},
  author={Reha H. T{\"u}t{\"u}nc{\"u} and Matthias Koenig},
  journal={Annals of Operations Research},
This article addresses the problem of finding an optimal allocation of funds among different asset classes in a robust manner when the estimates of the structure of returns are unreliable. Instead of point estimates used in classical mean-variance optimization, moments of returns are described using uncertainty sets that contain all, or most, of their possible realizations. The approach presented here takes a conservative viewpoint and identifies asset mixes that have the best worst-case… 

Distributionally Robust Portfolio Optimization

It is shown that determining the asset allocation that minimizes the distributionally robust risk can be done using quadratic programming and a one line search.

Robust optimization and portfolio selection: The cost of robustness

Robust Optimisation and Portfolio Selection: The Cost of Robustness

Robust optimization is a tractable alternative to stochastic programming particularly suited for problems in which parameter values are unknown, variable, and their distributions are uncertain. We

Robust Optimization Approaches to Single Period Portfolio Allocation Problem

Portfolio management is one of the fundamental problems in financial decision making. In a typical portfolio management problem, an investor is concerned with an optimal allocation of the capital

Robust Optimization with Application in Asset Management

This dissertation first analyzes parametric convex conic optimization problems and corresponding robust problems with respect to stability properties and applies robustification to the well-known portfolio optimization problem of Markowitz.

Robust portfolio asset allocation and risk measures

This paper reviews several mathematical models, and related algorithmic approaches, that have recently been proposed to address uncertainty in portfolio asset allocation, focusing on Robust Optimization methodology, and analyzes the relationship between the concepts of robustness and convex risk measures.

Robust portfolio asset allocation and risk measures

This paper reviews several mathematical models, and related algorithmic approaches, that have recently been proposed to address uncertainty in portfolio asset allocation, focusing on Robust Optimization methodology, and analyses the relationship between the concepts of robustness and convex risk measures.

Investigating the effectiveness of robust portfolio optimization techniques

Two well-known robust techniques when applied to a specific portfolio selection problem are investigated, and the portfolios selected by the respective robust counterparts are compared.

Robust Portfolio Selection with Near Optimal Centering

Quantitative asset allocation models have not been widely adopted by practitioners because they suffer from two problems: the lack of robustness and diversification of portfolios obtained through



Robust Portfolio Selection Problems

This paper introduces "uncertainty structures" for the market parameters and shows that the robust portfolio selection problems corresponding to these uncertainty structures can be reformulated as second-order cone programs and, therefore, the computational effort required to solve them is comparable to that required for solving convex quadratic programs.

Portfolio Optimization in Practice

These results suggest that, over the time period studied, international diversification into foreign bonds has offered some benefits. These benefits are best measured, however, by comparing the

Robust Mean-Variance Portfolio Selection

It is analytically and numerically shown that, under model misspecification, the use of statistically robust estimates instead of the widely used classical sample mean and covariance is highly beneficial for the stability properties of the mean-variance optimal portfolios.


This paper investigates the properties of a market for risky assets on the basis of a simple model of general equilibrium of exchange, where individual investors seek to maximize preference functions

On the Sensitivity of Mean-Variance-Efficient Portfolios to Changes in Asset Means: Some Analytical and Computational Results

This paper investigates the sensitivity of mean-variance(MV)-efficient portfolios to changes in the means of individual assets. When only a budget constraint is imposed on the investment problem, the

Estimation for Markowitz Efficient Portfolios

Abstract Given a set of N assets a portfolio is determined by a set of weights xi, i = 1, 2, …, N; Σ N i=1 xi = 1 indicating the proportion of the value of the portfolio devoted to each asset. A

Does Asset Allocation Policy Explain 40, 90, or 100 Percent of Performance?

Disagreement over the importance of asset allocation policy stems from asking different questions. We used balanced mutual fund and pension fund data to answer the three relevant questions. We found

The Effect of Errors in Means, Variances, and Covariances on Optimal Portfolio Choice

There is considerable literature on the strengths and limitations of meanvariance analysis. The basic theory and extensions of MV analysis are discussed in Markowitz (1987) and Ziemba and Vickson