AQR On Risk Parity: The Dog That Did Not Bite

In August, Equity Selling in Risk Parity Was a Tiny Fraction of Market Volume

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Following August equity market volatility, commentators have been lining up to blame risk parity as a driving force behind that volatility. As I’ve said before: I can’t define short-term silliness, but like Justice Stewart I can identify short-term silliness when I see it. This recent rush to use risk parity as a pin cushion is just another case of such silliness.

Some colleagues who lead our risk parity strategies here at AQR explain. Why isn't risk parity the cause? Well, we believe risk parity simply isn’t big enough to generate the level of trading necessary to create very large market gyrations and most certainly...