Measuring Portfolio Risk: Using the Markowitz Model, Conditional Value at Risk, and Risk Parity for Asset Allocation in Medium-Duration Investments

Abstract

The Financial Crisis of 2008 increased investors' interest in managing risk. The Markowitz Model, Conditional Value at Risk, and Risk Parity all offer a different approach to measuring risk in an investor's portfolio. By comparing these three models on a five year, long only investment horizon, it is possible for a first-time investor to have a better understanding of what portfolio allocation works best according to his risk preferences.