THE RISK ATTRIBUTION OF DYNAMIC PORTFOLIO: A SHAPLEY VALUE PERSPECTIVE

10.6291/AIAPM.202212_(11).0002

Jow-Ran Chang；Mao-Wei Hung；Chen-Ting Lien

Dynamic Portfolio ； Shapley Value ； Portfolio Risk Decomposition

Advances in Investment Analysis and Portfolio Management

11期（2022 / 12 / 01）

35 - 59

英文

We present the Shapley value as a methodology for portfolio risk attribution and use it to derive risk attribution measure of dynamic portfolio. Unlike static portfolio, dynamic portfolio, or long-term investor portfolio, considers a variety of factors: the risk aversion level, the return predictability, and the assets' covariance with future shock. By considering thoroughly all possible portfolio constructions, Shapley value has properties that allow it to perform more coherently in the complex portfolio choice than classical risk measure does. Using data in the United States from 1960-2016, we find that in measuring the risk attribution of both static portfolio and dynamic portfolio, Shapely value delivers consistent views of risk attribution, while classical decomposition presents diverse results. These patterns are robust even we consider the long-term investor with different levels of risk aversion.

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