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SR increases as a function of measurement frequency because the random components of the return have a greater chance to cancel out for longer frequencies. There's nothing mysterious about that. Using variance instead of standard deviation makes no sense from a dimensional standpoint. If returns are in dollars, standard deviation is in dollars but ...


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One word about annualizing: what does it tell you about the coming year: nothing. Markets will change in 6 months and even more in 12 and any volatility today annualized does not tell you anything about the year to come. This is even more true for expected returns. If markets shot up 10% last month then I bet the market will not be up annualized 120% by the ...


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It means you should buy the 4 stocks. The model you are using seems to restrict short selling, i.e. by removing this restriction you could get negative weights on certain assets with all assets adding up to 100%. Re your question on limiting your asset selection to stocks that are expected to outperform the population: this has to do with your assumptions ...


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The two fund separation theorem still hold. If you have N risky asset with your efficient frontier and add the risk free asset, as result you achieve another efficient frontier that boil down in a straight line (the CML). You can see also this short explanation Tangency portfolio and CML - Why does it have the highest sharpe ratio? In other the two-fund ...


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In a physical system the eigenvectors represent "modes" of random "vibration" (random movement) of a system and the eigenvalues represent the variance (i.e. amplitude) of each of these modes. The eigenvalues added together equal the variance of the overall (combined) movements (the Decomposition Property). In the stock market the main mode (biggest ...



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