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Sep 302014
Visualize Portfolio Risk

This application is interactive. Be patient as it loads. Example: Unconstrained Maximum Sharpe Ratio portfolio Notice the Contributions to Risk are proportionate to the Contributions to Return Example: Unconstrained Minimum Variance portfolio Notice the Weights and Contributions to Risk are Equal Example: Risk Parity portfolio Contributions to Risk are equal Assumptions Correlation matrix Definitions Weight: […]

 Posted by on September 30, 2014 Asset Allocation, Portfolio Risk 1 Response »
Oct 102012
The Risk Parity Tower of Babel

Update, Nov. 7 2012: Evidently the interviewer was Bob Litterman, renowned in several areas of quantitative finance, especially for the Black-Litterman model. The first several times I heard of or read about risk parity I was puzzled. The media, it seemed, had distilled descriptions of risk parity into some variation on “a leveraged bond portfolio” […]

Sep 262012
A reader asks: Can a risk parity portfolio have short positions?

Many of this site’s visitors are interested in learning about risk parity, especially how to obtain risk parity weights using Excel. The PortfolioWizards Risk Parity Excel workbook is easily the most popular download on the site. Recently a hedge fund manager contacted me who had been playing with the risk parity workbook. He asked whether […]

Dec 222011
Alternative Time Windows for Evaluating Performance

  Dynamic Trading Rules: Change the Time Window and a Different Picture Emerges Further examining a 200-day Moving Average (200MA) strategy for mitigating downside risk, I was recently examining how the picture changes when you alter the time window for assessing these strategies. Below is a scatterplot of a dynamically managed strategy using 200MA (vertical […]

Dec 122011
Market Timing or Dynamic Risk Management?

  Institutional investors have long been indoctrinated with the notions of stocks for the long run and the importance of remaining fully invested. As I touched on stocks for the long run in an earlier post, in this one I will address remaining fully invested. The argument in favor of remaining fully invested went like […]

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