Category Archives: Blog
garch models caught in the spotlight
An attempt to clarify the basics. Previously There have been several posts about garch. In particular: A practical introduction to garch modeling The components garch model in the rugarch package Genesis A reader emailed me because he was confused about the workings of garch in general, and simulation with the empirical distribution in particular. If … Continue reading
S&P that might have been
The S&P 500 returned 29.6% in 2013. How might that have varied? S&P weights There are many features that could vary — here we will keep the same constituents (almost) and weights with similar sizes but that are randomly assigned rather than based on market capitalization. That is, we want the large weights of our … Continue reading
Blog year 2013 in review
Highlights of the blog over the past year. Most popular posts The posts with the most hits during the year. A practical introduction to garch modeling (posted in 2012) A tale of two returns (posted in 2010) The top 7 portfolio optimization problems (posted in 2012) The number 1 novice quant mistake (posted in 2011) On smart beta … Continue reading
Posted in Blog, R language
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Further adventures with higher moments
Additional views of the stability of skewness and kurtosis of equity portfolios. Previously A post called “Four moments of portfolios” introduced the idea of looking at the stability of the mean, variance, skewness and kurtosis of portfolios through time. That post gave birth to a presentation at the London Quant Group. That talk gave birth … Continue reading
Another tale of two returns
The further adventures of returns on short positions. Previously There are three posts that are instructive about returns: A tale of two returns Returns with negative net asset values An easy mistake with returns There is also a (satirical) post on the statistical distribution of returns: “The distribution of financial returns made simple”. Scenarios You … Continue reading
The efficacy of higher moments in portfolio optimization
On Monday I gave a talk at the London Quant Group entitled “Exploring the efficacy of higher moments in portfolio optimisation”. A substantial number of people showed up, and they taught me quite a lot about the subject. So it seems to have been successful. There are now annotated slides available. The slides point towards … Continue reading
Posted in Quant finance
Tagged kurtosis, portfolio optimisation, portfolio optimization, skewness
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London Quant Group, and other upcoming events
Highlighted London Quant Group 2013 December 9, London. Pat Burns on “Exploring the efficacy of higher moments in portfolio optimisation”. Abstract: Typically portfolio optimisation only uses the first two moments — expected returns and variance. Is it useful to also use skewness and kurtosis? This talk will take a new look at optimisation, and then from … Continue reading
Posted in Events
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Historical Value at Risk versus historical Expected Shortfall
Comparing the behavior of the two on the S&P 500. Previously There have been a few posts about Value at Risk (VaR) and Expected Shortfall (ES) including an introduction to Value at Risk and Expected Shortfall. Data and model The underlying data are daily returns for the S&P 500 from 1950 to the present. The VaR and … Continue reading
Posted in R language, Risk
Tagged Conditional Value at Risk, Expected Shortfall, S&P 500, Value at Risk
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Review of ‘Thinking, Fast and Slow’ by Daniel Kahneman
I put off reading this book because I thought that I would already know most of its contents. I was wrong. Really wrong. There is a review with a more statistical orientation on the Burns Statistics site. Here the focus is towards economics. The topics that most directly impinge on fund management are: prospect theory versus … Continue reading
R for Finance, and other upcoming events
Highlighted R for Finance Workshop A two-day course introducing R as applied to finance. 2013 December 3 & 4, London. Lead by Ron Hochreiter with appearances by Pat Burns and others. Details at the Unicom site. New Events Thalesians — New York 2013 November 13, 6PM. Luca Caprioti on “Real time counterparty credit risk management with adjoint … Continue reading
Posted in Events
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