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seen Jul 27 '13 at 3:00

Jul
10
comment Is there such a thing as “sell-off risk” in bond funds?
From both of your most recent comments, I can see I'm still not being particularly clear. I just edited to try to focus the discussion on the very specific thing that the cited authors seem to mean by "sell-off risk".
Jul
9
comment Is there such a thing as “sell-off risk” in bond funds?
@AlexeyKalmykov That is my question. From the original question, the claim is: "By this they apparently mean that shareholders in the bond fund who do not sell experience losses as a direct result of other shareholders selling their shares in a period of steep market losses."
Jul
9
comment Is there such a thing as “sell-off risk” in bond funds?
@MattWolf "again there is no difference, when people sell assets that comprise a portfolio that you invest in then the asset itself as well as the portfolio will suffer" - I gave an example of my understanding of how this would work. Can you give a counter-example?
Jul
9
comment Is there such a thing as “sell-off risk” in bond funds?
@AlexeyKalmykov "Even if you sell with other shareholders you are still exposed to market impact risk" -- I don't care about the sellers; I care about those who continue to hold the fund.
Jul
9
comment Is there such a thing as “sell-off risk” in bond funds?
@MattWolf Please keep comments/answers specifically focused on the damage to continuing shareholders from others selling. The inflation panic stuff is pretty far off topic. Of course selling when the market is down is going to cost you money--it's the difference between holding a fund and holding the bonds directly that interests me.
Jun
26
comment Why is an inverted yield curve a problem?
@TomAu That's the theory, yes. That explanation does not matter for market participants seeking a crystal ball but (if true) matters for academic theory. For market participants, the problem is the usual one that the world reacts to all known information and beating the market becomes difficult/impossible again.
Aug
15
comment How many explanatory variables is too many?
The bullet point after "within the range of the data" means don't extrapolate. That's different than out-of-sample. Key point there is does not affect $\hat{y}$ ....
Aug
15
comment How many explanatory variables is too many?
"The holdout sample won't necessarily catch multicollinearity" is precisely right. And irrelevant for prediction. A random Google search confirms, with among others "If interest is only in estimation and prediction, multicollinearity can be ignored" public.iastate.edu/~alicia/stat328/Model%20diagnostics.pdf
Aug
15
comment How many explanatory variables is too many?
The point is that you arrived at humidity down/uptown by trying out a bunch of regressors and chancing on one that fit that dataset. Therefore, the holdout sample is unlikely to show the regressor as being good, and you'll see the problem. If it does work in the holdout sample, maybe you've just found a new regressor that actually does work. It doesn't matter whether it's causal or not--for prediction covariance is good enough as long as it consistently covaries.
Aug
15
comment How many explanatory variables is too many?
You want to know how it performs out-of-sample. Therefore you agree in advance that when developing your model you will only use, say 2/3 of your data. That tricks nature into giving you 1/3 of your data as out-of-sample data that you actually can observe. This is a common technique in predictive applications, and it works quite well when you've got a lot of data--as is likely the case here.
Aug
14
comment How many explanatory variables is too many?
This is a good start, but ultimately it's still in-sample. If what you're interested in is prediction, it's hard to beat actually predicting out-of-sample and seeing how good it gets. Since you don't care about the coefficients just the results, avoiding multicollinearity isn't really the answer here.
Aug
10
comment Modified Durations of Different Noncallable Bonds and function of Maturity
The horizontal asymptote will always be at duration=(1 + 1/i) where i is the current market interest rate expressed in proportion terms (e.g. i=.05 for a 5% rate).
Aug
10
comment Modified Durations of Different Noncallable Bonds and function of Maturity
See the answers to this question about how to calculate the maximum duration for some more references and graphs: quant.stackexchange.com/questions/1624/…
Aug
9
comment Closed-form formula for approximate maximum duration of a bond?
Thanks for this. I'm still sorting through all this, but in re-reading both the Pianca paper and the Hawawini paper I am starting to realize that my previous lack of progress on this issue results from my assumption that the closed-form formulae for duration were approximations. By contrast, Pianca seems to use them as though they are exact. I'll have to work through the derivations and figure out whether they are, in fact, exact. If so, I can likely avoid the whole iterative algorithm and just go directly from maturity to duration.
Aug
9
comment Closed-form formula for approximate maximum duration of a bond?
These aren't actual bonds. This is portfolio generation, which is why working backwards is required. The idea is that you given that you already have a collection of (n-1) bonds in a portfolio with duration d and a target portfolio duration D, what is the maturity of the $n^{th}$ bond you should purchase to move the new d to D.