Month: May 2011
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Why it’s so easy to loathe high frequency traders: you can see them profit
This morning Tyler Cowen wrote again about High Frequency Trading. His post has to do with the idea that our economic intuition breaks down at small scales. I don’t think small scale is the matter; I think transparency is. Middlemen have been loathed for a long time, even though they provide a useful function. But…
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Risk parity: Why it belongs in your toolkit
Risk Parity portfolios are also known as Equal Risk or Balanced Risk portfolios, because their portfolio risk is balanced equally among their components. If you build investment products, manage client assets, or advise clients on asset allocation, chances are there is a place for Risk Parity among your portfolios. Risk Parity fits best wherever you…
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Predict beta more accurately by using imaginary returns
Updated October 2014, replacing the word “imaginary” with “reconstructed.” – TMA If you’re managing portfolios without using a risk model, you’re probably relying on regression statistics of asset returns to estimate risk characteristics such as Beta. For reporting purposes or for the purpose of measuring sensitivity to a broad index whose constituents don’t change drastically…