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 »
Sep 162014

Recently I have been playing with the R application, Shiny. Shiny offers a way to embed R applications on the web. Here is a toy model I developed to illustrate the interaction between portfolio weights and contributions to portfolio risk. Access the app here: Visualize Portfolio Risk. This is a slightly less elaborate version of […]

 Posted by on September 16, 2014 Portfolio Risk No Responses »
Oct 172013

Ed. Originally written in 2011. Published in 2013 “Look ma, I have skill!” An idea that would have been regarded as heresy in the 1990s has gained acceptance and respectability: the idea that investors are not rewarded for risk, systematic or otherwise. Thanks to the long-term performance dominance of low volatility assets over the past […]

 Posted by on October 17, 2013 Benchmarks, Portfolio Risk No Responses »
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 212011
What a Difference a Day Makes (or, "Fooled by Look-Ahead Bias")

  This year I’ve written a few times about using the 200-day Moving Average (200MA) as a market timing indicator. Evolved Perspective on the 200-Day Moving Average Since my last posts my appreciation for and complaints about 200MA have evolved. I previously wrote that if enough speculators begin blindly following the 200MA it could lead […]

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 […]

Nov 102011
Eric Falkenstein to Society of Actuaries: There Is No Risk Premium

When I accepted the Investment Section spot on the Society of Actuaries Annual Meeting planning committee, the first person I thought of to invite to speak was Eric Falkenstein. Eric Falkenstein is a quant, an author, and a blogger. He has a PhD in Finance from Northwestern University’s Kellogg School of Management. He has developed […]

 Posted by on November 10, 2011 Expected Return, Portfolio Risk No Responses »
Oct 312011
Risk Parity Portfolios Aren't Always Less Volatile Than Market Weight Portfolios

I ran across a nice piece on Risk Parity by Portfolio Probe. These days it’s rare that anyone other than Wai Lee at Neuberger Berman acknowledges that Risk Parity has broader applications than simply overweighting bonds with respect to equities. One point I’d like to make on the Portfolio Probe post: like the author, I […]

 Posted by on October 31, 2011 Portfolio Risk, Risk Parity No Responses »

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