Proportionality between allocations in asset management

Juan David Vega Baquero () and Miguel Santolino ()
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Juan David Vega Baquero: Riskcenter, Department of Econometrics, Universitat de Barcelona, Spain.
Miguel Santolino: Riskcenter, Department of Econometrics, Universitat de Barcelona, Spain.

No 202601, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics

Abstract: Asset allocation refers to deciding the optimal participation of each asset within a portfolio. Therefore, these participations are a composition, and compositional methods should be used to treat the data and perform analysis over it. When trying to find relationships between parts of a composition, proportions have shown to be more suitable than correlations. In this paper, using a previous proportionality index as starting point, two new indexes are proposed and all of them are used to analyze the asset allocation in a portfolio composed of five stocks from the IBEX 35 (the Spanish stock market index). Results shed light on the connection between volatility, allocations and their proportionality.

Keywords: Aitchison Geometry; Capital Allocation; Portfolio Theory; Proportionality. JEL classification: C01; E22; G11. (search for similar items in EconPapers)
Pages: 24 pages
Date: 2026-01
New Economics Papers: this item is included in nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:ira:wpaper:202601

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