Category Archives: Blog
Testing an S&P 500 prediction
If a particular prediction comes true, how surprised should we be? The prediction The page that sparked my curiosity tells of a prediction made a year ago that the S&P 500 would beat its historic high by the end of 2011. It says that at the point the prediction was made, the level of the … Continue reading
MoneyScience is reborn
The MoneyScience website has recently had a dramatic change. It now has a social infrastructure, and the resources are better organized. Here I report on the discoveries I’ve made so far in the bit of time that I’ve been poking about on the site. Events There is a calendar of events that is organized by … Continue reading
Email subscription now available
The blog Email It is now possible to subscribe to the Portfolio Probe blog via email. Just click on: Subscribe to the Portfolio Probe blog by Email (The captcha is often quite challenging, you’ll probably want to refresh a few times until you find one that you think you can actually solve.) This will send … Continue reading
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Benchmarking low-volatilty strategies
Low volatility investing and performance measurement — my favorite topic scheme — how could I resist? The paper The paper is “Benchmarking Low-Volatility Strategies” by David Blitz and Pim van Vliet. The problem They claim that using a low-volatility index as a benchmark for a low-volatility strategy is not a good idea because: All low-volatility … Continue reading
Posted in Fund management in general, Performance
Tagged benchmark, low volatility investing
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Winsorization
Winsorization replaces extreme data values with less extreme values. But why Extreme values sometimes have a big effect on statistical operations. That effect is not necessarily a good effect. One approach to the problem is to change the statistical operation — this is the field of robust statistics. An alternative solution is to just change … Continue reading
Review of “Adapt” by Tim Harford
The subtitle is “Why success always starts with failure”. Executive summary Brilliant. Funny. Enlightening. Complexity We live in a complex world. Exhibit number 1 (page 1) is the Toaster Project. Our brains are too small to know what to do in a complex world. The rules of adapting The three rules of adapting (page 36) … Continue reading
Posted in Book review
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Talking The R Journal latest release
Volume 3/1 of The R Journal has been released. It of course has articles about using R. In addition it has a feature that I highly support. In preparation for the UseR! Conference 2011 August 16-18 in Coventry there are two Help Desk articles on making a good technical presentation. Technical presentation Rob Hyndman writes … Continue reading
Highlights of the London Quant Group Technology Day
A summary of the high points of the day. Factor models and optimization Three of the talks formed a theme: factor models of variance — especially as applied to portfolio optimization. The basic problem is that variance matrices are created with error. A variance matrix is a key input to (some) portfolio optimizations. The optimizer … Continue reading
Performance ratios, bootstrapping and infinite variances
If returns had infinite variance, would there be a problem bootstrapping information ratios? Background There is a discussion on the Quant Finance group of LinkedIn with the title: “How do you measure the confidence intervals of performance ratios?” One suggestion was to use the statistical bootstrap. This resulted in a discussion of the efficacy of … Continue reading
Posted in Performance, R language
Tagged infinite variance, information ratio, qqplot, statistical bootstrap
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Bubble anatomy
Here is a schematic of a financial bubble. This is taken from a post by The Reformed Broker. Questions The picture feels right to me, but … Is there any data to support it? What process could fit a model like this without assuming the answer? Related posts Review of “Boombustology” by Vikram Mansharamani Subscribe … Continue reading
