Beyond Markowitz: A Comprehensive Wealth Allocation Framework for Individual Investors

Paper: SSRN 925138

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

Complexity vs Empirical Score

• Math Complexity: 3.0/10
• Empirical Rigor: 2.0/10
• Quadrant: Philosophers — conceptual discussion, limited math and data

Why this score: 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.

Research Flowchart

  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"]