Timeline for How to hedge a MV portfolio against crises
Current License: CC BY-SA 3.0
5 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| Jan 31, 2017 at 14:17 | comment | added | Stefan Voigt | Did you consider using a framework such as Black-Littermann which allows you to enforce a certain relaxation of the estimates given your data? I am not sure if you get your question correctly, so I hesitate to write a full answer: Is your concern that a crisis periods leaves you with unreasonable estimates (for example variances way to big), and you want to ensure that your weights reflect that these estimates are probably not valid anymore? | |
| Jan 26, 2017 at 20:18 | comment | added | nbbo2 | For covariance two years is a reasonable period. But for estimating returns 2 years is far too short, the resulting estimated are too variable. You should use much more data, say 2 decades, for returns, or other methods of estimation. | |
| Jan 26, 2017 at 18:21 | comment | added | WJA | Yes indeed. Simply a rolling window of 2 years. Thats why the weights are not proper when estimating them using a period of stress for a non-stress period. | |
| Jan 26, 2017 at 18:17 | comment | added | nbbo2 | Just so I understand, you are using the most recent two years of data to estimate both the covariance matrix and the expected returns? | |
| Jan 26, 2017 at 12:01 | history | asked | WJA | CC BY-SA 3.0 |