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Working Paper

Risk Parity Is Not Short Volatility (Not That There's Anything Wrong with Short Volatility)

August 21, 2019 - Benjamin Hood John J. Huss Roni Israelov Matthew Klein

Are risk parity strategies hiding an implicit short volatility? To find out, we simulated stylized versions of three asset-class (equity, fixed income, and commodities) risk parity and short volatility strategies, and we compared the trading behavior and returns of each.

Perspective

Risk Parity Derangement Syndrome

February 7, 2018 - Cliff Asness

Cliff Asness explains why risk parity and trend-following strategies are not to blame for the recent market volatility.

Perspective

Risk Parity: The Dog That Did Not Bite

September 21, 2015 - Cliff Asness

Commentators are blaming risk parity as a driving force behind August's equity market volatility. We think this is short-term silliness, and explain why we believe risk parity isn't the cause.

Perspective

Risk Parity Is Even Better Than We Thought

June 1, 2015 - Cliff Asness

It’s not all or nothing when it comes to risk parity. Investors typically think they should be all 60/40 or all risk parity, but we think there's merit in adding risk parity to an existing 60/40 portfolio.

Perspective

Yes, Lever, but With Care

February 13, 2015 - Cliff Asness

Conventional wisdom holds that sensible investors avoid leverage. Cliff Asness argues that, if prudently employed, portfolio leverage can be beneficial in modest doses, with proper concern for its dangers.

Perspective

Risk Parity: Why We Lever

September 24, 2014

The role of leverage in risk parity is often misunderstood. For risk parity investors, there may be benefits to using modest leverage—it helps them build a more diversified, more balanced, and potentially higher-return-for-the-risk-taken portfolio.

Journal Article