Basic Portfolio Construction and Expected Utility

Abstract

A practical guide to constructing a long-term investment portfolio using the theory of expected utility as developed in Part I. Our goal here is to address the portfolio at the macro level of asset-class selection and scaling; more micro issues will be discussed in later notes. We see a special case of the portfolio construction results is closely related to the `All-weather' and `risk-parity' portfolios popularized by Bridgewater, AQR, and others.