Non-normal investment returns and dramatic swings in valuation may occur more frequently, according to “Rethinking Asset Allocation”, a new report from State Street Corp.
The report examines the changing view of traditional practices and indentifies new techniques and investment strategies that focus on measures of market turbulence, risk, liquidity and diversification. The study of turbulence and unusual price movements, according to the paper, helps investors understand market sentiment and construct robust risk models.
In response to the financial crisis many investors are reappraising their portfolios. Institutions have decreased their allocations to domestic equities and increased their domestic fixed-income and alternative