Tag Archives: reverse optimization

Implied alpha and minimum variance

Under the covers of strange bedfellows. Previously The idea of implied alpha was introduced in “Implied alpha — almost wordless”. In a comment to that post Jeff noticed that the optimal portfolio given for the example is ever so close to the minimum variance portfolio.  That is because there is a problem with the example … Continue reading

Posted in Quant finance, R language | Tagged , , | 7 Comments

Implied alpha — almost wordless

We have a portfolio with weights A=20%, B=60%, C=20%.  That we have this particular portfolio is really a market prediction.  What are the returns that the portfolio is “expecting”? In technical terms, we want the implied alpha of the portfolio (found via reverse optimization).  We’ll explore this in a mostly pictorial fashion.  Eventually we do … Continue reading

Posted in almost wordless, Quant finance | Tagged , | 6 Comments