tag:blogger.com,1999:blog-8152901575140311047.post7683532882140908072..comments2024-03-28T12:49:46.624-04:00Comments on Musings on Markets: Asset allocation for illiquid marketsAswath Damodaranhttp://www.blogger.com/profile/12021594649672906878noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-8152901575140311047.post-30979218056784515712010-12-26T10:17:24.196-05:002010-12-26T10:17:24.196-05:00My point is not that you do a full fledged optimiz...My point is not that you do a full fledged optimization. It is that illiquid asset classes look far better on a historical risk/return table than they really are. In fact, I have seen proponents of alternative asset classes use their historical risk/return numbers to push investors to invest more in them. That was the story used to push private equity and hedge funds to endowments in 2006 and 2007. Last week, I read an article suggesting that investors invest in fine wine, because it offered a great risk/return trade off. My only response was that if it did not work out, you could at least drink away your sorrows.Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-57779916226778234422010-12-26T07:53:53.726-05:002010-12-26T07:53:53.726-05:00i guess risks related to illiquid assets from the ...i guess risks related to illiquid assets from the price-movement perspective can be factored.. i guess ill throw a poison type random variable in the mixture.. definitely the optimization/control problem will change.. irl.. i think, nobody uses quadratic programming..its too elementary and applies to text-books ,strictlyrecon.lalluhttps://www.blogger.com/profile/01181964238573463352noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-86410775899738856202010-12-24T23:35:46.974-05:002010-12-24T23:35:46.974-05:00Professor,
It sounds scientific, yes infact we ne...Professor,<br /><br />It sounds scientific, yes infact we need to factor in liquidity factor in portfolio optimization problem. But i don't see (at least on the top of mind) any compatible liquidity measure which can be factored in as a mere constraint in the optimization problem without restating the complete problem. Can you suggest any such measure which helps me here??Surender Komerahttps://www.blogger.com/profile/01144672939566638597noreply@blogger.com