Retail sales and industrial output bounced back in June, providing more evidence that recession risk remains low for the US. Although both indicators have been wobbly this year, today’s updates suggest that the trend is stabilizing after a rocky first half for 2016.
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Asset Allocation:
A Recommendation for Resolving the Collision between Theory and Practice
Larry J. Prather (Southeastern Oklahoma State University), et al.
April 26, 2016
We examine the creation of a low-cost optimal risky portfolio that individual investors can easily construct and manage. We consider five index mutual funds and three precious metals that are easy for investors to trade. Collectively, the mutual funds track the returns of the entire U.S. equity market, 98% of foreign stocks, U.S. investment grade bonds, all domestic REITs, and emerging markets. The three precious metals are gold, platinum, and palladium. Because these mutual funds are available in ETF form, we provide optimization results with and without short selling. Optimization results differ greatly from conventional wisdom regarding optimal asset allocation.
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