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@article{ART002549681},
author={Inwook Song},
title={Using Decision Making Model for Asset Allocation},
journal={Asset Management Review},
issn={2288-6672},
year={2019},
volume={7},
number={2},
pages={46-64},
doi={10.23007/amr.2019.7.2.46}

TY - JOUR
AU - Inwook Song
TI - Using Decision Making Model for Asset Allocation
JO - Asset Management Review
PY - 2019
VL - 7
IS - 2
PB - Institute of Management Research, SungKyunKwan University
SP - 46
EP - 64
SN - 2288-6672
AB - Past studies about asset allocation focus on allocation methodology or estimating expected returns and expected risks. However, each pension fund has developed its own solution to solve these issues. On the other hands, pension funds express more difficulties to make qualitative decisions about target return, risk tolerance level, and optimal asset allocation choice. This study examines whether using decision making model for asset allocation under various scenarios can help pension funds in this domain and improve pension fund performances. Our study found that, if we use conservative decision making model, risk adjusted performance is improved compared to using traditional asset allocation model. When occurrence probability is not recognized, the Sharpe ratio is improved under Minimum-regret rule(Regret) as wee as under Hurwicz rule(Hurwicz2) with 70% weighted toward Minimax rule. When occurrence probability is recognized, the Sharpe ratio of Target-return optimization(Target2), which set real value maintaining(CPI+100bp) level as the target rate, is also improved. This new method also meets the management strategy of pension funds that pursue a stable and sustainable investment performance. Although the use of decision making model is rather qualitative and arbitrary, this kind of alternative approach can help advance the asset allocation process. Considering the practical importance of the topic, we expect similar studies to follow and contribute to the improvement of pension fund performances.
KW - Asset Allocation;Scenario;Decision Making Model;Hurwicz rule;Regret
DO - 10.23007/amr.2019.7.2.46
ER -

Inwook Song. (2019). Using Decision Making Model for Asset Allocation. Asset Management Review, 7(2), 46-64.

Inwook Song. 2019, "Using Decision Making Model for Asset Allocation", Asset Management Review, vol.7, no.2 pp.46-64. Available from: doi:10.23007/amr.2019.7.2.46

Inwook Song "Using Decision Making Model for Asset Allocation" Asset Management Review 7.2 pp.46-64 (2019) : 46.

Inwook Song. Using Decision Making Model for Asset Allocation. 2019; 7(2), 46-64. Available from: doi:10.23007/amr.2019.7.2.46

Inwook Song. "Using Decision Making Model for Asset Allocation" Asset Management Review 7, no.2 (2019) : 46-64.doi: 10.23007/amr.2019.7.2.46

Inwook Song. Using Decision Making Model for Asset Allocation. Asset Management Review, 7(2), 46-64. doi: 10.23007/amr.2019.7.2.46

Inwook Song. Using Decision Making Model for Asset Allocation. Asset Management Review. 2019; 7(2) 46-64. doi: 10.23007/amr.2019.7.2.46

Inwook Song. Using Decision Making Model for Asset Allocation. 2019; 7(2), 46-64. Available from: doi:10.23007/amr.2019.7.2.46

Inwook Song. "Using Decision Making Model for Asset Allocation" Asset Management Review 7, no.2 (2019) : 46-64.doi: 10.23007/amr.2019.7.2.46