The Compensation Portfolio
13 Pages Posted: 4 Mar 2018 Last revised: 20 Apr 2018
Date Written: February 22, 2018
Abstract
We successfully show that it is possible to optimize both for risk and for asset allocation without compromising the optimization of individual goals by introducing the novel concept of a compensation portfolio. Therefore, we solve for the global vs. local optimization paradox by bridging Modern Portfolio Theory (MPT) and Behavioral Portfolio Theory (BPT).
Keywords: Optimization, goal-based investing, compensation portfolio
JEL Classification: G11, G40, G41
Suggested Citation: Suggested Citation
Rohner, Philippe and Rohner, Philippe and Uhl, Matthias, The Compensation Portfolio (February 22, 2018). Finance Research Letters (2018), Available at SSRN: https://ssrn.com/abstract=3128360
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