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Risk-Return Parity Model for the Broad Assets Based on the Fed Model

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IEIS 2020

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Abstract

The asset allocation has always been an essential research content of global institutional investors. Based on the Fed model, this paper proposes a risk-return parity model for a wide range of assets to balance the returns and risks of institutional investors. Firstly, this paper reviews the proposal and development of the Fed model. Secondly, this paper constructs a measure of the expected return of assets by different assets of medium and long-term cash flow. The measure could compare valuations of the broad investment assets such as fixed income, stocks, trust, real estate, and maximize the revenue under the regulatory constraints. Meantime, this paper puts forward the model of asset parity and makes empirical retrospection. Finally, this paper introduces the risk adjustment factors of each asset and proposes a risk-return parity model for a large class of assets based on the Fed model. This paper enriches the theoretical system of asset allocation and has widespread practical application value.

This research is supported by the Program of the Co-Construction with Beijing Municipal Commission of Education of China (Grant No. B20H100020, B19H100010).

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Author information

Authors and Affiliations

  1. Beijing Laboratory of National Economic Security Early-warning Engineering, Beijing Jiaotong University, Beijing, China

    Yanglong Chen

  2. National Academy of Economic Security, Beijing Jiaotong University, Beijing, China

    Xinyi Mei

  3. National Information Center, Beijing, China

    Qingde Wang

Authors
  1. Yanglong Chen
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  2. Xinyi Mei
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  3. Qingde Wang
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Corresponding author

Correspondence to Yanglong Chen .

Editor information

Editors and Affiliations

  1. School of Economics and Management, Beijing Jiaotong University, Beijing, China

    Menggang Li

  2. Budapest, Hungary

    Gábor Bohács

  3. School of Economics and Management, Beijing Jiaotong University, Beijing, China

    Guowei Hua

  4. School of Economics and Management, Beijing Jiaotong University, Beijing, China

    Daqing Gong

  5. School of Economics and Management, Beijing Jiaotong University, Beijing, China

    Xiaopu Shang

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Chen, Y., Mei, X., Wang, Q. (2021). Risk-Return Parity Model for the Broad Assets Based on the Fed Model. In: Li, M., Bohács, G., Hua, G., Gong, D., Shang, X. (eds) IEIS 2020. Springer, Singapore. https://doi.org/10.1007/978-981-33-4363-4_28

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