May 4, 2011
We come closer to a definitive answer on the relative merit of Ledoit-Wolf shrinkage versus a statistical factor model for variance matrices. Previously This post builds on the post [...]
April 28, 2011
Statistical factor models and Ledoit-Wolf shrinkage are competing methods for estimating variance matrices of returns. So which is better? This adds a data point for answering that question. Previously [...]
April 21, 2011
What is the effect on predicted and realized volatility of substituting risk fraction constraints for weight constraints? Previously This post depends on two previous blog posts: "Unproxying weight constraints" [...]
April 18, 2011
How well do asset weight constraints constrain risk? The setup In "Unproxying weight constraints" I claimed that many constraints on asset weights are really a proxy for constraining risk. [...]
March 28, 2011
Overfitting is a problem when trying to predict financial returns. Perhaps you've heard that before. Some simple examples should clarify what overfitting is -- and may surprise you. Polynomials [...]
February 25, 2011
There is a deep connection between political mechanisms and economic mechanisms, at least according to Ajay Shah. Price flexibility Ajay Shah has a post called Jittery regimes fix prices. [...]
February 20, 2011
The Thalesians is a group that has been going for a few years in London, and is just about to have its first event in New York. It holds [...]
February 10, 2011
The site is http://quant.stackexchange.com/ A new area has emerged in Stack Exchange for Quantitative Finance (in trying to spell that I now know why it is usually just "quant"). [...]
February 8, 2011
Much of what has been said and thought about beta in finance is untrue. Myth 1: beta is about volatility This myth is pervasive. Beta is associated with the [...]
January 12, 2011
It is ever so easy to make blunders when doing quantitative finance. Very popular with novices is to analyze prices rather than returns. Regression on the prices When you [...]