CFA Society of Tucson

This presentation explores the potential application of Statman's behavioral finance portfolio to help investors and their advisers formulate an appropriate strategic asset allocation.

The presentation begins with a review of a few major behavioral finance findings and moves on to a proposal of a set of four potential fundamental investment objectives, which investors must prioritize and among which they must allocate 100% of their wealth.

The presentation then explains subportfolios specifically geared to deliver on each of these objectives. The overall strategic asset allocation is then derived from aggregating these subportfolios into a single whole.

The presentation concludes with observations on the unintended benefits of such an approach and an admonition that it does not in any way invalidate the fundamental principles underpinning the strategic asset allocation process.