Project With Jean-François Bégin

A Simulation-Based Approach to Asset Allocation

The portfolio choice problem is the process of allocating one's wealth to various financial assets in such a way as to optimize some criterion (e.g., a utility function).

In a seminal paper, Brandt, Goyal, Santa-Clara, and Stroud (2005) propose the use of a simulation-based method for solving practical discrete-time portfolio choice problems. The authors argue that their method allows for non-standard preferences and many assets with arbitrary return distribution. This project investigates this method and compares it to other well-known solutions. The student will be responsible for the following, among others:

  1. Familiarizing themselves with the literature on asset allocation.
  2. Understanding the framework of Brandt, Goyal, Santa-Clara, and Stroud.
  3. Writing code to implement the method.
  4. Extracting data from commonly used datasets.
  5. Applying the method to realistic scenarios and comparing it with other asset allocation methods.
  6. Documenting all work.