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How should institutional investors decide on which financial assets to include in their portfolios? The asset allocation problem is a good example of an area where practitioners rely to a large extent on insights from academic research. Financial theory provides a number of basic tools that have been widely accepted among practitioners of asset management. Ever since the break-through of mean-variance analysis in the late 1960’s, a pallet of increasingly advanced models has been developed in order to form more efficient portfolios from an increasing number of new financial assets, based on insights from financial economics research.

As the recent financial crisis evolved, however, it became apparent to many investors that their asset portfolios were not behaving according to their models and expectations. As portfolio market values plunged, diversification effects failed to materialize when most needed. Fires sales pushed asset prices far outside their expected distributions. As market liquidity dried up, corrective actions were hard, or impossible, to take. In hindsight, many investors questioned their approach and procedures to strategic and tactical asset allocation.

How can recent research advances in finance help us design asset portfolios that can better withstand, or even profit from, extreme financial market events? The main goal of this conference is to deepen our understanding of asset allocation and asset pricing, in the perspective of insights gained from the crisis. Topics include: dynamic asset allocation; portfolio choice and liquidity; asset pricing and liquidity; time‐varying risks and returns; predictability in asset prices; and portfolio rebalancing and trading. The conference brings together leading academics with financial practitioners and policymakers to discuss recent research on these issues and the broader implications for practice and policy.

Our five distinguished keynote speakers have all made significant contributions to this topic, but from different angles: Kent Daniel has analyzed overconfidence and herding behavior in asset markets. Luis Viceira is co-author of the book ”Strategic Asset Allocation” together with John Y. Campbell, and have worked with questions surrounding the pricing of bonds. Pedro Santa-Clara has made both theoretical and empirical contributions to normative asset pricing, especially concerning practical implementations. Harrison Hong and Tobias Moskowitz have, among other things, analyzed the effects of local bias in investors’ portfolios and the influence of social interaction in the allocation decision. The latter two hold the Fischer Black Prize from the American Finance Association, honoring the top finance scholars under age 40.