Category Archives: Blog
Market arrows
Graphs like Figure 1 are reasonably common. But they are not reasonable. Figure 1: A (log) price series with an explicit guide line. Some have the prices on a logarithmic scale, which is an improvement on the raw prices. The problem with this sort of plot is that two particular data points are taken as … Continue reading
Posted in Fund management in general, R language
Leave a comment
Premortem stress tests
To look in the corners we want to avoid. David Rowe’s latest Risk column, “Stress testing culture”, concerns the difficulty of developing good stress scenarios. One of his particular concerns is that it is against our nature to consider the failure of something that we are working on. We are masters at dodging that. There … Continue reading
Thank you government
You probably thought the title was ironic. Why should that be? Mutual benefit Falkenblog has a post that includes: When the barista says ‘thank you’ for buying coffee, and I say ‘thank you’ back, we have a double thank you moment, symptomatic of positive gains from trade. In contrast, I don’t say ‘thank you’ when … Continue reading
Posted in Off topic
Leave a comment
Review of “Boombustology” by Vikram Mansharamani
How can we spot bubbles before they burst? Executive Summary I had high hopes for this book. The first 5 chapters lived up to my expectations. The remaining chapters, though interesting in spots, are a bit vapid. However, those first 5 chapters are worth the price of admission. Chapters The book starts with a discussion … Continue reading
Posted in Blog, Book review, Fund management in general
Tagged financial bubble, Minsky Instability Hypothesis
2 Comments
Selections from the R/Finance conference
The R/Finance conference happened in Chicago at the end of April. If, like me, you weren’t there, you can still benefit from it because slides from many of the talks are now online. Here is a quick synopsis (in chronological order) of some of the talks I found most interesting. Michael Kane Michael Kane and … Continue reading
Attilio Meucci starts praying
Attilio Meucci has written “The Prayer” which gives a ten-step process of quantitative analysis of the profit and loss stream. The paper is nicely laid out. Each step includes at least one “key concept” box. These give a clear, concise statement of a main idea. These allow you to quickly get the thrust without needing … Continue reading
A data search engine
Zanran is a new search engine that helps you find data. It indexes items that have tables or figures that seem to display data. It looks to be significantly more useful than a general search engine when it’s data you want. Search results are displayed in the manner you are used to. Except on the … Continue reading
Posted in Fund management in general
Leave a comment
Specific differences between Ledoit-Wolf and factor models
What can we learn about the difference in structure between a Ledoit-Wolf variance matrix and a corresponding factor model variance? Previously We’ve generated a set of random portfolios with constraints on the risk fractions of a Ledoit-Wolf variance matrix, and a corresponding set of random portfolios with risk fraction constraints from a statistical factor model. … Continue reading
Posted in Quant finance, R language
Tagged correlations, covariance matrix, Ledoit-Wolf shrinkage, risk fraction, variance matrix
Leave a comment
Recap of London Quant Group Spring Seminar
The London Quant Group Spring Seminar took place this Monday and Tuesday 2011 May 16-17. There were 9 talks — I give a brief (and biased) summary of each. Dan di Bartolomeo Dan talked about the information ratios that active managers have. He claims that the information ratio is upwardly biased compared to what we … Continue reading
Posted in Quant finance
Tagged information ratio, low volatility investing, Value at Risk
4 Comments
What is a good benchmark?
One suggestion is that benchmarks should be: transparent & unambiguous frame-able & customize-able appropriate with full coverage investable The source of this suggestion is Setting the Benchmark: Spotlight on Private Equity. This was discussed by All About Alpha. The paper considers indices and peer groups as benchmarks. They did not consider random portfolios. Let’s look … Continue reading
