Negative returns? No problem! New strategy makes all assets valuable.
The article shows that risk-parity portfolios can be optimal even with assets that have negative returns. The researchers found conditions that make risk-parity strategies likely to be optimal, not just when assets have similar correlations and returns. They also explain how negative-return assets can still be useful in a diversified portfolio. Additionally, they provide a method to translate risk targets into a ranking of asset returns, which can help investors make informed decisions about their portfolios.