Reputation
3,200
Top tag
Next privilege 3,500 Rep.
Protect questions
Badges
8 16
Newest
 Yearling
Impact
~67k people reached

Jan
13
comment Black-Litterman with simple portfolio
Have you tried googling for Black-Litterman. There are tons of examples out there.
Jan
3
comment Bayesian or Frequentist in Finance?
Frequentist is far more common. The best way to learn is reading books and then writing programs. In terms of what is better in practice, I think out-of-sample Bayesian and Michaud have better properties than Mean-variance.
Dec
31
answered Bayesian or Frequentist in Finance?
Dec
31
answered Bayesian estimation of asset pricing models
Dec
14
awarded  Popular Question
Dec
11
comment How to find the best fitting GARCH model for a portfolio composed of 3 ETFs in R?
I'm pretty sure you can output the likelihood on rugarch, which means it's not much additional work to get the AIC. Then just write a function to compare the fits.
Dec
7
revised How to extrapolate VaR?
deleted 21 characters in body
Nov
24
comment What are the canonical books for statistics applied to finance?
And his website has tons of support materials.
Nov
19
comment Different ways of portfolio optimization
@user8 I think James is pretty clear. For these problems, it is pretty easy to analytically show that they all produce the same efficient frontier. So for a $\lambda$ you could find a target return or target volatility problem that will produce the same optimal portfolio. Whether you want to use one or the other depends on what you're trying to do and what optimization software you have. Nevertheless, contra James I still could imagine a situation where I would optimize utility and still constrain variance or tracking error.
Nov
14
answered CVaR reformulation correct?
Nov
13
revised Mutivariate t markets
added 1 character in body
Nov
12
comment Mutivariate t markets
@Quartz I made a slight edit to throw in some basic background. I'm not sure how the elliptical point really helps you. I find that once I start working with heavy tail distributions, I typically just move to a Monte Carlo approach rather than work analytically. Any other issues I can help you with?
Nov
12
revised Mutivariate t markets
added 300 characters in body
Nov
12
answered Mutivariate t markets
Nov
6
comment Factor Model - Minimum Variance Portfolio [Complete Proof]
It's not a coding issue so much as it's the result of using long short portfolios. If you do the optimization imposing the long-only constraint on weights, then the results will be more stable. I'm sort of loathe to do things in terms of factor weights because it might force me to go short a lot of positions I wouldn't want. You might alternately just allow yourself to be long and short liquid instruments (like long SPY short IWM to account for a size effect).
Nov
6
comment Factor Model - Minimum Variance Portfolio [Complete Proof]
Perhaps I wasn't particularly clear. The $\Sigma$ could be any invertible covariance matrix. I meant that you can plug in the formula for $\Sigma$ being whatever it is. Obviously, if you're only using the factor covariance matrix, then your weights would be $K \times 1$ (which seems silly to me), but you can easily transform that into the security covariance matrix and have it be $N \times 1$. So you could replace $\Sigma$ with whatever formula you need and then express the weights analytically in terms of each part.
Nov
6
answered Factor Model - Minimum Variance Portfolio [Complete Proof]
Oct
27
comment Portfolio Optimization using S&P Universes
This question might be a bit too general to be able to answer. It might be improved by discuss within the context of a particular optimization or factor model.
Oct
27
comment How is stock data objectively different to this random walk?
You can have a random walk with a non-normal distribution. However, if the non-normal distribution is the result of some underlying process (like regimes per @vonjd or stochastic volatility), then it would not be a random walk anymore.
Oct
26
revised Statistical arbitrage using eigen portfolios
added 1 character in body