Multigoal-Based Asset Allocation Model in Family Wealth Management

Authors

  • Zilong Xiao School of Data and Computer Science, Sun Yat-Sen Universit, Guangzhou, 510006, China

Abstract

By introducing the concept of mental accounts in behavioral finance, according to the multigoal-based asset allocation principle, the family should allocate assets to three categories: personal risk category that does not harm basic living standards, market risk category that maintains lifestyle, and aspirational risk category that enhances lifestyle. A rigorous risk-test questionnaire is designed to assess the specific types of risk preferred by family investors (conservative/moderate/aggressive), and the allocation weights of the three categories of assets are entered as constraints into the extended MV model. Then, taking the expected return and standard deviation, as well as the covariance matrix (obtained by the correlation coefficient matrix) of various risky assets as input conditions, and using the optimization toolbox in MATLAB for quadratic programming, the optimal portfolio of financial
assets can be obtained according to the specific risk preference of family. After subtracting the entire wealth of family from the necessary non-financial asset allocation, the remaining assets are allocated to the categories suggested by the optimal solution.

Keywords: Family Wealth Management, Mental Accounts, Multigoal-Based Asset Allocation, Modern Portfolio Theory

Cite As

Z. Xiao, "Multigoal-Based Asset Allocation Model in Family Wealth Management", Engineering Intelligent Systems,
vol. 27 no. 3, pp. 121-132, 2019.





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Published

2019-09-01

Issue

Vol. 27 No. 3 (2019): International Journal of Engineering Intelligent Systems

Section

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