Why is the first principal component a proxy for the market portfolio, and what other proxies exist?
Let's say that I have a universe of stocks from a certain sector. I want to compute the market portfolio of this sector. Beta is the covariance between each stock and the market. But how do you ...
What is the relationship between risk aversion and preference for skewness and kurtosis in portfolio optimization?
Is there any relationship between the risk aversion coefficient in an individual's utility function (commonly used in portfolio optimization) and the preference for higher moments such as skewness and ...
What are the most important portfolio management theories you must know in order to competently manage an investment portfolio? In order to keep the topic focused, I would like to narrow down the set ...
What is the role of skewness in portfolio optimization?
Let's say we have a predictive distribution of expected returns for N assets. The distribution is not normal. We can interpret the dispersion in the distribution as reflection of our uncertainty (or ...