The Compensation Portfolio

13 Pages Posted: 4 Mar 2018 Last revised: 20 Apr 2018

See all articles by Philippe Rohner

Philippe Rohner

University of Zurich - Swiss Banking Institute (ISB); University of Zurich - Department of Banking and Finance

Matthias Uhl

University of Zurich - Department Finance

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

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

Philippe Rohner

University of Zurich - Swiss Banking Institute (ISB) ( email )

Plattenstrasse 14
CH-8032 Zurich, Zurich 8032
Switzerland

University of Zurich - Department of Banking and Finance ( email )

Plattenstr 32
Zurich, 8032
Switzerland

Matthias Uhl (Contact Author)

University of Zurich - Department Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

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