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 [...]

Jul 292011

In several posts I have struggled to articulate the mathematically convenient concept of a historical representation of an index or portfolio as if its past weights had always been equal to its current weights. I have called the returns to such a time series various terms, including “matrix returns,” “imaginary returns,” and “pro forma returns.” [...]

Jun 142011

I recently delved into the new Russell stability indices and started inspecting the related Russell Factor ETFs. The ETFs began to trade toward the end of May. If you’ve spent any time researching the so-called “low volatility anomaly” you’re well aware that empirically we have little evidence that investment returns are related to risk.. This [...]

Jun 032011
Introducing the "<s>Matrix</s> Reconstructed Return" - a Handy Shortcut for Estimating Beta

For anyone building and managing equity portfolios for clients, I have two pieces of advice. 1. Use a fundamental risk model. One of the first advantages of fundamental risk models is they afford easier portfolio optimization. When you have thousands of stocks to choose from, in order to model them completely using returns you would [...]

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