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Jul
25
comment Shrinkage Estimator for Newey-West Covariance Matrix
You may want to add the link to the preprint in the question. I still am curious as to what is the issue with simply replacing the sample estimate with the Newey West estimate. Anyway, the original paper implies that it is estimated through GMM rather than Maximum Likelihood. I would have suggested finding the Bayesian prior that would be equivalent to whatever shrinkage you want to make and then adopting the approach for the Newey-West estimator, but since it is not based on ML I'm not sure if that would work.
Jul
25
comment Shrinkage Estimator for Newey-West Covariance Matrix
My understanding of Newey-West estimators is that it is used to calculate the covariance matrix of parameters in a regression. I could imagine using it in a robust portfolio optimization (concerned with uncertainty in the mean parameters), but whether it makes sense to use it for estimating the covariance of returns, I don't know. That being said, why are you not able to simply replace the sample covariance in the shrinkage formula with your new Newey-West estimate?
Jul
10
comment Counterintuitive time varying Beta with Kalman filter
I don't quite understand what you're talking about with respect to the $\beta_{t}$ being bigger than zero if $\beta$ is less than zero. Why don't you try to create a data generating process that involves a time-varying $\beta_{t}$ and then run your code on that to see how good it does. I've only ever programmed my own Kalman Filters so I can't say whether you're using the KFAS package correctly or not. It's not terribly challenging and you could use that to help confirm if that's causing a problem with your code.
Jul
10
comment How to make a historical index of a group of materials in which the set of materials changes every month?
Agree with Alexey and Imorin. Would also add that this sounds like an inventory question also, which implies that there are accounting rules on it.
Jul
9
answered Determining the portfolio return distribution to calculate CVaR/ES
Jun
25
answered Principle Component Analysis vs. Cholesky Decomposition for MonteCarlo
Jun
19
comment How to calculate the conditional variance of a time series?
Assuming the Garch model is the same as the one from the paper and the data is the same (and same frequency), I would expect them to look very similar. One difference is that most packages initialize the conditional variance with the long-run variance, so that's one area I would check but if you used the sample variance to initialize though the difference should be small.
Jun
18
comment How to calculate the conditional variance of a time series?
Most Garch packages will output the conditional variances for you. For the centered returns, you could estimate an autoregressive model and subtract out the conditional mean. They are assuming a constant mean, which is also fine.
Jun
12
revised Are minimum-risk and minimum-variance portfolios equivalent?
added 19 characters in body
Jun
12
answered Are minimum-risk and minimum-variance portfolios equivalent?
Jun
10
answered Volatility Return Distribution/Garch Modeling
Jun
6
comment Continuous returns for negative roll-adjusted futures data
I wouldn't expect negative values if I were calculating a continuous futures contract. For the client, why don't you figure out a way to express what they want as a trading strategy first. Perhaps there is a way to express it in another way (like the difference in the return between the nearest continuous contract and the second nearest continuous contract).
Jun
5
comment Block Bootstrapping Relative Returns
What is the purpose of the bootstrap?
Jun
3
comment FRA-Strategy: Make 3-month and 1-year Excess returns comparable
Make a total return series that would invest in your strategy and then calculate the standard deviation/Sharpe from that.
Jun
3
comment Data sources for financials of global equities
@BrianB H&M is a big Swedish retailer, so that approach wouldn't apply (it's also why there isn't any data on Google/Yahoo). I'm not aware of any free site for global balance sheet information. I get mine from Bloomberg or Factset.
May
28
comment Risk Budgets with Target Portfolio Volatility
I have played around with this in the past and my understanding was that I could target the return/volatility or a specific set of risk contributions, but not both. To get a better sense of it, why don't you draw the frontier. Adjust the target volatility (or return) from the minimum variance volatility (or return) to the volatility (or return) of the maximum return portfolio and minimize the contribution differences.
May
17
comment What's the first time-integral of price called?
I'm not sure a physics approach is helpful. Maybe you could pick up a book on stochastic calculus.
May
9
comment How does the CME set margin requirements on commodity Futures
I just googled "CME margins" and put in the first link that came up after noticing it had some helpful links on the side.
May
9
comment How does the CME set margin requirements on commodity Futures
cmegroup.com/clearing/margins
May
9
comment When calculating CIP between EU and US, which interest rates data to use?
As in en.wikipedia.org/wiki/Compound_interest. If you set up the math properly, you will get a difference between the two, but it will be nowhere near as large as the differences you are reporting.