Category Archives: Blog
Jackknifing portfolio decision returns
A look at return variability for portfolio changes. The problem Suppose we make some change to our portfolio. At a later date we can see if that change was good or bad for the portfolio return. Say, for instance, that it helped by 16 basis points. How do we properly account for variability in that … Continue reading
Posted in Performance, Quant finance, R language
Tagged jackknife, statistical bootstrap
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Correlations and postive-definiteness
On the way to another destination, I found some curious behavior with average correlations. The data Daily log returns from almost all of the constituents of the S&P 500 for years 2006 through 2011. The behavior Figure 1 shows the actual mean correlation among stocks for the set of years and the mean correlation with … Continue reading
Posted in Quant finance, R language
Tagged BurStFin, Ledoit-Wolf shrinkage, positive definite, variance estimation
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CambR and other upcoming events
New events CambR (Cambridge UK R user group) 2012 May 29 6:30 PM for 7:00 PM start. Pat Burns “Inferno-ish R” Abstract: While R is wonderful, it is not uniformly wonderful. We highlight a few things generally found to be confusing, and outline the forces that have driven such imperfections. Markus Gesmann “Interactive charts with … Continue reading
Posted in Events, R language
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Exponential decay models
All models are wrong, some models are more wrong than others. The streetlight model Exponential decay models are quite common. But why? One reason a model might be popular is that it contains a reasonable approximation to the mechanism that generates the data. That is seriously unlikely in this case. When it is dark and … Continue reading
Posted in R language, Statistics
Tagged exponential decay, exponential smoothing, model error
5 Comments
Newsletter sign-up problems
There have been some issues with the sign-up process for the Portfolio Probe newsletter and the Portfolio Probe user’s list. The issues may or may not be in the past tense. The way the process is supposed to work is: You sign up for one or both lists You get a message from us saying … Continue reading
Posted in Portfolio Probe
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Random portfolios: 6 steps to a better fund management industry
Only puny secrets need protection. Big discoveries are protected by public incredulity. — Marshall McLuhan Random portfolios have the power to improve the practice of asset management in several ways. Here are six. 1) Measure active managers There is no convincing evidence that more than a handful of funds have consistently outperformed. This should tell … Continue reading
Posted in Performance, Quant finance, Random portfolios, Risk
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Thalesians and other upcoming events
Real Soon Now Thalesians (London) 2012 May 16 Matthew Dixon “A Bayesian Approach to Discovering Private Companies for Private Equity Investments”. Details of the event. Thalesians (New York) 2012 May 17 Attilio Meucci “Liquidity-, Funding- and Market-Risk” Details of the event. Other new events Thalesians (San Francisco) 2012 May 30 Jeremy Evnine “Accidental Quant”. I … Continue reading
Posted in Events
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Asset correlations with minimum variance portfolios
The minimum variance portfolios have slightly reduced correlations to assets in weight-constrained portfolios. Previously “Portfolio diversity” introduced the topic of asset-portfolio correlations. It also generated four sets of long-only random portfolios as of the start of 2011 using constituents of the S&P 500: exactly 20 names, weights between 1% and 10% exactly 200 names, weights … Continue reading
Posted in Quant finance
Tagged asset-portfolio correlation, minimum variance portfolio, S&P 500
6 Comments
Diverse US portfolios did well in 2011
Constraining the maximum asset-portfolio correlation gave bigger returns and smaller volatility. Previously “Portfolio diversity” introduced the topic of asset-portfolio correlations. It also generated four sets of long-only random portfolios as of the start of 2011 using constituents of the S&P 500: exactly 20 names, weights between 1% and 10% exactly 20 names, maximum asset-portfolio correlation … Continue reading
Posted in Quant finance
Tagged asset-portfolio correlation, diversification, portfolio diversity, S&P 500
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Portfolio diversity
How many baskets are your eggs in? Meucci diversity Attilio Meucci directly addresses the adage: Don’t put all your eggs in one basket. His idea is to think of your portfolio as a set of subportfolios that are each uncorrelated with the rest. If your portfolio can be configured to have a lot of roughly … Continue reading
Posted in Quant finance, R language
Tagged asset-portfolio correlation, diversification, portfolio diversity, S&P 500
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