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Jul
24
revised Which approach dominates? Mathematical modeling or data mining?
added 373 characters in body
Jul
24
revised Which approach dominates? Mathematical modeling or data mining?
added 144 characters in body
Jul
24
revised Which approach dominates? Mathematical modeling or data mining?
added 144 characters in body
Jul
24
answered Which approach dominates? Mathematical modeling or data mining?
Jul
24
asked robust portfolio optimization re-balancing with transaction costs
Jul
22
answered How to design a custom equity backtester?
Jul
21
comment Efficiency vs. Robustness - To use a constant or not in single factor time-series regression?
The optimizer might have used the error terms to gauge the certainty of the estimate (similar to Omega - the uncertainty matrix - in Black Litterman procedure). In my scenario, the regression equation is specified as: Excess Return of security = Intercept + Beta * Factor Return + Error. The expected value of the error term is zero. So the question is whether the intercept should be a free variable or suppressed.
Jul
20
comment Variable Selection in factor models
Hi I-CJW, can you elaborate a bit more on variance reduction?
Jul
20
comment Should Sharpe ratio be computed using log returns or relative returns?
Note that annualizing with square root of time implies that the asset returns are i.i.d.
Jul
20
revised How would you test the hypothesis “There are no idiosyncratic returns available in the market”?
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Jul
19
comment Annualzing the log of daily returns riddle
Thanks Joshua -- yes that is a very similar problem and creative solution. Thank you for sharing!
Jul
19
answered How would you test the hypothesis “There are no idiosyncratic returns available in the market”?
Jul
18
revised Efficiency vs. Robustness - To use a constant or not in single factor time-series regression?
edited title
Jul
18
asked Efficiency vs. Robustness - To use a constant or not in single factor time-series regression?
Jul
15
comment Easiest and most accessible derivation of Black-Scholes formula
@vonjd - yep that's the one!
Jul
15
accepted Variable Selection in factor models
Jul
14
accepted Annualzing the log of daily returns riddle
Jul
14
revised Annualzing the log of daily returns riddle
added 195 characters in body; edited tags
Jul
14
comment Annualzing the log of daily returns riddle
Granted that (1 + R)^251 = .08. However, this is not a solution as it side-steps the problem by stating the problem in arithmetic returns. It is general practice to use a continuously compounded return such as Ln(1+R) for regression, to continuously compound interest, price options, etc. My point is that the log form of the return has no economic meaning when a large value of arithmetic return are involved. Even in the seemingly everyday case of annualized daily returns we seem to bump up against this < -1 issue
Jul
14
comment Easiest and most accessible derivation of Black-Scholes formula
Neil Chriss wrote an excellent book describing the options pricing formula. It's no longer in print and quite expensive on the secondary market, but worth a look at your local library