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I recently skimmed (because I'm too mathematically challenged to read) Ralph Vince's "The New Money Management (Wiley, 1995).

Vince's thesis is that asset allocation should be based on the laws of probabilities and that one should pay as much attention to trading close to (but to the left of)optimal f levels as to factors over which s/he has no control (and perhaps limited ability to evaluate). He talks in terms of "finding the peak in an n+1 dimensional landscape of leverage space, where n is the number of components in a portfolio," if that helps any of you mathematicians. My cursory exposure to statistical theory in college leads me to believe he's on to something, but the computations and formulae were much too complex for me to understand and use. Any opinions on the theory? And is there software out there that uses a statistical aproach to asset allocation?
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