Author Archives: Pat
Physical books of “The R Inferno” and “S Poetry”
Hardcopy versions of both The R Inferno and S Poetry are now available for sale. Physical economy Buy The R Inferno (the version dated 2011 April 30) Buy S Poetry Discount The publisher, Lulu, has a coupon for a 25% discount off purchases (up to a maximum of $50) that is good until the … Continue reading
Posted in R language
Tagged R abnormalities, R absurdities, R anomalies, R oddities, R peculiarities, R quirks, R trouble spots, S Poetry, The R Inferno
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Lessons from warblers and sticklebacks
Falkenblog has a post on ecological studies of animal intelligence. The entire post is interesting, but I particularly like his last sentence: [I]f you think that because you have a really high IQ, are really rich, or are a good speaker, you are therefore the smartest guy in any room, you are going to make … Continue reading
Posted in Fund management in general
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Sensitivity of risk parity to variance differences
Equal risk contribution of assets determines the asset weights given the variance matrix. How sensitive are those weights to the variance estimate? Previously The post “Risk parity” gave an overview of the idea. In particular it distinguished the cases: the assets have equal risk contribution groups of assets have equal risk contribution A key difference … Continue reading
Posted in Quant finance, R language
Tagged equal risk contribution, factor model, Ledoit-Wolf shrinkage, risk parity
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The top 7 portfolio optimization problems
Stumbling blocks on the trek from theory to practical optimization in fund management. Problem 1: portfolio optimization is too hard If you are using a spreadsheet, then this is indeed a problem. Spreadsheets are dangerous when given a complex task. Portfolio optimization qualifies as complex in this context (complex in data requirements). If you are … Continue reading
Market predictions for years 2011 and 2012
A review of market predictions and results for 2011, and a calibration for 2012 predictions (of 19 equity indices plus oil). Previously One year ago the post “Revised market prediction distributions” presented plots showing the variability of various markets assuming no market-moving forces. The follow-up post “Some market predictions enhanced some of those plots with … Continue reading
Posted in Quant finance, R language
Tagged 2011 market prediction, 2012 market prediction, market prediction
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R-specific review of blog year 2011
Most popular posts Two of the ten most popular posts during the year were completely about R: The R Inferno revised (number 6) Solve your R problems (number 9) R played a role in the other eight top ten, and many of the rest of the posts as well. R The R Inferno was revised … Continue reading
Three talks from CFE
The Computational and Financial Econometrics conference was just held in London. Here are three talks from the large menu. Lars Helge Hass The objective is to find a way to do an asset allocation optimization that includes private equity. A problem of course is that private equity is seriously opaque. To highlight that, using one … Continue reading
Posted in Quant finance
Tagged portfolio optimization, regime switching model, variance compression
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Portfolio optimization inside out
A possible way to search for constraints that improve optimization. The perspective The usual way of thinking about portfolio optimization is to first consider the utility and then restrict to where the constraints are satisfied. A perfectly reasonable view. We use random portfolios to get a different point of view: first ensure that the constraints … Continue reading
There’s news and there’s news
Two recent posts included the word “news”, but in different senses. Events “News” in the sense of reports on events was discussed in “News analytics”. We can think of this as an approximation to objective reality. Market moves The post “Volatility estimation and time-adjusted returns” used “news” in the sense of “that which moves market … Continue reading
