Beyond Markowitz: A Comprehensive Wealth Allocation Framework for Individual Investors

ArXiv ID: ssrn-925138 “View on arXiv”

Authors: Unknown

Abstract

In sharp contrast to the recommendations of Modern Portfolio Theory (MPT), a vast majority of investors are not well diversified. This neglect of diversificatio

Keywords: portfolio diversification, modern portfolio theory, asset allocation, investor behavior, risk management, Multi-Asset / Equities

Complexity vs Empirical Score

• Math Complexity: 3.0/10
• Empirical Rigor: 2.0/10
• Quadrant: Philosophers
• Why: The paper proposes a conceptual framework extending Markowitz by adding personal and aspirational risk dimensions, relying on qualitative discussion and examples rather than dense mathematical derivations or rigorous backtesting.

  flowchart TD
    R["Research Goal: Why do investors fail to diversify despite MPT?"] --> M["Methodology: Qualitative Analysis of Investor Behavior"]
    M --> D["Data Inputs: Empirical Data & Behavioral Observations"]
    D --> C["Computational Process: Multi-Asset Portfolio Simulation"]
    C --> F["Key Findings: Investors prioritize simplicity and familiarity over theoretical optimal allocation"]
    F --> O["Outcome: Proposed Comprehensive Wealth Allocation Framework"]