Questions tagged [portfolio-management]

The professional management of an investment portfolio of various securities (shares, bonds and other securities) in order to meet specified investment goals. The process includes the specification of investment objectives and constraints, choice of asset mix, formulation of portfolio strategy, selection of securities, execution, revision, and evaluation.

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6 views

Strategic Leverage

I recently read an article about a pension fund that is adding 5% leverage to its strategic asset allocation. One of the arguments presented is that this would allow the fund to achieve better ...
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Sample Variance of Portfolio

Let $w$ denote a vector of portfolio weights, $r_i$ denote the $i$th return vector, $\Sigma$ denote the Covariance matrix of $r_i$ and let $\hat{\Sigma}$ denote the sample covariance matrix of $r_i$. ...
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Literature about optimal number of stocks in a diversified portfolio

Is there any recent paper on how many assets one should consider for portfolio optimization techniques? I found: – https://www.jstor.org/stable/2330969?seq=1#metadata_info_tab_contents – https://...
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What are the quantitative requirements to distinguish between asset classes?

What are the quantitative criteria to distinguish between asset classes? I ask this as many institutional investors are undergoing strategic and tactical asset class decisions at the moment. How ...
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Backtesting Hedged Equity Portfolio with Options

I am trying to find some papers and methodologies on backtesting an Equity portfolio with broad-based index options as hedge. For example, take SPY and systematically hedge it with 9 months 30 delta ...
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adjusting treasury futures exposure using micros

I want to decrease my exposure to a 10-year note futures by using 10-year micro futures after volatility-adjusting them. I've calculated that the difference in volatility in the micro has 5.125x the ...
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Fx futures pairs

I want to setup a pairs trade with the Japanese yen as the quote currency and Mexican peso as the basis currency. (long MXP vs JPY) 2 /M6J contracts, notional is 1,250,000 JPY = 10966.5*2 = 21933 USD ...
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characteristics of factor portfolios

In the paper Characteristics of Factor Portfolios (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1601414), when it discusses pure factor portfolios, it says that simple style factor portfolios ...
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Can you still sum the weighted up betas to find portfolio up beta, or not?

The portfolio beta in the conventional sense is simply the sum of weighted beta coefficients for each holding in the portfolio. Is it the same for portfolio up and down beta, where I can simply take ...
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How to calculate increases in equity of a valuing asset

I would like to know how to calculate equity of an owned asset. My problem specifically is that I own a BTC wallet and have some family members contributing to that wallet as well. Having person A B ...
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Difference between eurodollar and 2 year note futures

What's the difference between these instruments? I know that the Eurodollar is for dollars outside of the US, but is there any material difference other than contract size when it comes to trading ...
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Portfolio optimization with Python/CVXPY: DCPError

I'm trying to implement a script for portfolio optimization on a sample universe of 3 future contracts. I have the following inputs: current allocation --> number of contracts currently held for ...
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Easy, but doubts - Annualize daily turnover

I am fairly certain I am correct but I just want to double-check on portfolio turnover calculation. I need to annualize the daily turnover rate. To calculate, the daily turnover, I am using the ...
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215 views

backtesting guide for research

I am a master student in finance and I am working on my portfolio management thesis. Within my thesis I will have to backtest a portfolio strategy for a balanced portfolio. I am looking for a guide/ ...
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Eurodollar futures volatility

Considering each point is 2500, how can I get the volatility of the jun 24 contract? On tastyworks I'm seeing a 0.7% iv for the contract, how can I translate it to standard deviation? Ex:sp500 15%...
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Shrinkage of the Sample Covariance matrix, theory

is there any theory behind the covariance matrix shrinkage paper, why it works? I am talking about this stats exchange thread
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What are some references for risk management of professional equity fund portfolios?

In particular, I am looking for methodologies for equity portfolios that are primarily managed by fundamental-based methods rather than quantitative strategies. Even though the portfolio is not based ...
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Why techniques for portfolio optimization do not take into account the non-fractionability of stock prices?

In a market with 3 stocks: Stock A with price 25.00 USD; Stock B with price 32.50 USD; Stock C with price 50.75 USD; Any portfolio optimization technique results in a vector of asset weights $\...
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Matrix with two columns - ESG Momentum Strategy

Background: I am conducting some research on equity returns on portfolios sorted on ESG Scores from Asset4. Specifically, I am trying to test if trading on long-short ESG momentum portfolios yields ...
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Calculation of Fama-French risk factors

Background: I am conducting some research on equity returns across Denmark, Finland, Norway and Sweden. The analysis is seen from a Danish investor’s point of view, and therefore I have currency ...
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how to do hedging in global market give the time zone issue [closed]

Hi I am considering a question: Give you have a global portfolio, consisting of U.S stocks, Euro Stocks or even Japan stocks and you have to rebalance daily according to my calculated trading signals. ...
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CURRENCY ADJUSTED RETURNS: How to adjust stock returns in foreign currency (e.g., EUR) to local currency (USD)?

I have collected monthly stock returns (in %) denominated in EUR and exchange rate EUR/USD. I am trying to adjust the monthly stock returns denominated in EUR to monthly stock returns denominated in ...
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Should I include zeros in downside beta calculation?

Downside beta is the beta coefficient for an asset and a benchmark restricting benchmark returns to be less than a given value. Let’s assume zero for simplicity. We have: If we have returns in period ...
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Why additivity assumption holds in CAPM and factor models? (Screenshot of a textbook included) [closed]

All the excerpts are from the book investment, written by Bodie. At the bottom of this post, I attached pages of the the book that show a related part of my question. Question 1. Why the variance of ...
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Currency hedging 3 month sterling libor futures

Each libor contract is 500,000 gbp. Can I hedge it by going short 8 gbp/usd futures per libor to hedge out currency risk considering each gbp/usd futures is 62,500 British pounds?
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Criticism against mean-variance analysis

Are there any good review papers or books about the criticism against mean-variance analysis?
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Long Breakeven inflation

I want to go long bei by going long individual 10 year tips and short individual 10 year treasuries. How do I calculate and match the duration?
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python portfolio tracker

any recommendations for a portfolio tracker that updates from csv ( or websocket but that would need to come with an active github and hopefully a man page). New to python, mainly creating charts from ...
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MPT pitfalls and solutions

I am a master student in finance and I am looking for a (literature) review paper (or book) about the pitfalls of MPT and the potential solutions. Specifically, I am interested in the sensitivity of ...
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60 views

Yield curve steepening/flattening using different duration treasury futures (TUT Spread) and volatility

Yield curve steepening: long 2 contracts 2 year (2 contracts due to contract size), short 1 contract 10 year Vice versa for flattening. If the 2 year note has a expected volatility of 2% per contract (...
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93 views

What is portfolio leverage?

The definition of leverage is: $$L = \frac{\sum_i |H_i|}{C} $$ where $C$ is the amount of capital, $H_i$ is the size of holdings in asset $i$. This strikes me as a weird definition for several reasons:...
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What is this return contribution methodology called (Multi-Period Contribution)

In reviewing the recently answered, below question Multi-Period Contribution I think the top answer (calculating weights at the end of each period) results in a method which does allow for multi-...
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53 views

sizing fx futures trades by targeting volatility

If I lever up a JPY/USD futures with a 6% volatility/contract 2x to meet my 12% volatility target, how many contracts should I buy per $100,000 I have in liquidity? How do I size my position based on ...
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117 views

How do you hedge your inventory when doing arbitrage?

Say I want to do arbitrage between Exchange A and Exchange B on USD/AAPL. This requires that I hold equal parts USD and AAPL. I don't want exposure to the movement in AAPL. How do I hedge my AAPL ...
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157 views

Information Coefficient (IC) Formulae Differences

I am learning about Fundamental Law of Active Management, and there seems to be two different Information Coefficient (IC) formulae presented. Though I myself am not a CFA candidate, these appear to ...
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Introduction to volatility targeting, scaling, timing

I am a finance student, but I am quite new to the field of asset management and quantitative Finance. I have to write a literature review about volatility targeting and I am looking for good resources ...
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Model for allocating capital between statistical arbitrage opportunities?

Dear users of quantstackexchange, I am currently creating a model with my team to look for the best (the highest returns) statistical arbitrage opportunity. This model will scan a significant amount ...
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91 views

What are some advanced portfolio rebalancing strategies?

Want to write some portfolio rebalancing code but have found only simple portfolio rebalancer strategies like calendar and threshold. I want to rebalance a portfolio with different asset groups (EQ, ...
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45 views

Calculation of Long-Short-Portfolio returns for different holding periods

I have monthly stock returns I want to invest in according to my trading signals. Now I want to figure out the optimal holding period of the long-short-positions. (The same time for both positions). I ...
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1answer
55 views

structural model - exposure estimation

The following example is from the book Active Portfolio Management by Grinold and Kahn. Suppose we have the factor returns and want to estimate the exposures/factor loadings. Say the factor returns ...
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39 views

Log Returns or Simple Returns for Portfolio Performance Analysis

Simple question but one thats stumping me slightly. I am doing a study analysing historical portfolio performance related to portfolios constructed with separate factors in mind. I realise simple ...
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66 views

Volatility targeting / sizing for option strategies

I am trying to work out how to properly size an option strategy to a given target volatility. Assuming I have \$100 capital and I would like to have a strategy's long-run daily volatility to be \$1 (e....
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440 views

Best books on portfolio construction?

I am a master of finance student and although I understand the basics and the theory of portfolio construction I am still struggling when it comes to the practical side of things, i.e. building a real-...
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Factor Models vs. Risk-Adjusted Performance Measures

I am building a study focusing on portfolio returns relative to a number of portfolios constructed using various ESG screening techniques. My intention is to measure and compare the performance of '...
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37 views

Portfolio variance over time vs. Portfolio variance from mix of two assets

Here are two facts about finance: 1. If stock returns are not independent, for example tomorrow's return equals today's return, then the variance over two days will be less than the variance of 1day*2....
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52 views

Correct way of making sharpe optimized portfolio?

I have monthly returns of about 977 securities of past 10 years. If I keep the returns as it is i.e. I do not multiply by 100 and keep the returns as 0.1, 0.2 , -0.3, 1.2 then I get different results ...
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58 views

Consensus expected excess return from Active Portfolio Management

In the book Active Portfolio Management, when discussing components of expected return (page 92 in edition 2), the authors mention that the consensus expected excess return $\beta_n\mu_B$ is the ...
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OLPS in real conditions

The Online Portfolio Selection problem has been extensively researched over the years, and various models have been implemented in open-source projects on GitHub. However the theoretical frameworks of ...
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51 views

How to model when to buy and sell a stock? [closed]

Given a set of historical data and volatility of price in each day, how is it possible to determine a price to purchase a stock at each day? For example, I want to find a price like $125 and receive a ...
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CAPM derivation - active portfolio management

In the book Active Portfolio Management by Grinold and Kahn, the author presents the derivation of CAPM. I am rather confused by the notation of $\beta$ in this derivation and hope to seek some help. ...

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