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Abstract:
The aim of this paper is to identify and analyze the strategies that characterize the dynamic asset allocation. In literature we have found 4 strategies: Buy and hold, Constant Mix, Constant-proportion portfolio insurance and option-based portfolio insurance (Perold & Sharpe, 1995). The insurance based ones are not in our focus so we will make an evaluation between the two first strategies. Risk propensity is different for any investor. Persons who are "risk averse" have a low risk propensity; those who are "risk takers" have a high risk propensity. The prices follow a stochastic process so the expected value will also depend on some random measure, which is the inverse of normal (0.1). Calculations are made for each level of significance observed. Comparison is therefore made between the expected values of the portfolio from year to year throughout the investment period, for both strategies and each observed significance level and risk propensity. The question at the base of the study is which strategy of dynamic allocation is appropriate in case of an asset's market which has a well-defined upward trend, and an accentuated and unpredictable volatility.
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