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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, ...

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34 views

Does Academic Research Destroy Stock Return Predictability?

McLean/Pontiff (2016) give evidence that portfolio returns are 26% lower out-of-sample and 58% lower after publishing an academic paper on variables, which are likely to predict cross-sectional ...
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61 views

Mean-Variance portfolio: How do I compute the variance when the portfolio is normalized

Let's consider the very basic of a Mean-Variance Portfolio: $$ \text{max}_{x} (1-\lambda)\sum_i^n\mu_ix_i-\lambda\sum_i^n\sum_j^n x_i Q_{ij}x_j $$ $$\text{ s.t. }\sum_i^nx_i=1 \text{ , } x_i \geq ...
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2answers
122 views

Does historical backtest data mean anything? [closed]

Sorry for this being a basic question. If I take a stock’s historical data and check for some rule I have found to buy/sell = what happened if I bought and sold this stock according to this rule in ...
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14 views

How can I run a credit quality breakdown of mutual funds that don't publish one?

I'm interested in using some mutual funds (specifically the Ivascyn-managed PIMCO Income Fund [PIMIX] and some other PIMCO funds) that don't publish a credit quality breakdown. This makes it ...
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28 views

Given a set of trading signals on individual assets, how to generate capital weights of the portfolio of assets?

Suppose that there is a model that generates trading signals on two assets. The trading signals are continuous and bound from 0 to 1. The interpretation of the trading signal is the desired long ...
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32 views

Algorithm to allocating capital to multiple strategies with bias

If there are multiple strategies that trade in different time frequencies, how do you allocate capital across them algorithmic-ally? I would also like this algorithm to have gradual bias towards ...
4
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2answers
142 views

Why is Fama French model a risk model

I get this question from interviewer about what is alpha model, what is risk model and why is Fama-French a risk model. As my understanding, alpha model forecast expected return, so the factor could ...
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1answer
45 views

Capital call VS Capital Commitment [closed]

I would like to understand the difference between capital call and capital commitment and needs to know the importance of these items in portfolio management
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1answer
59 views

Country allocation -optimization 3 countries

I have the following problem: an equity portfolio allocated to 3 countries. Each country has an independent indicator (signal) which takes values from -4 to 4. The allocation for each country at ...
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2answers
68 views

How to calculate the multi-asset class portfolio vega?

I am viewing a risk report of a hedge fund and the portfolio vega seems to be a plain summation of the vegas of the different asset classes the fund invests in (i.e. Equity, Credit etc) As far as I ...
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26 views

Minimize tracking error while maximizing realized tax loss

I apologize in advance for the basic nature of this question. I've tried to research other contributor's comments on this topic, but my knowledge of the required math and statistics is insufficient. ...
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2answers
256 views

Portfolio Analysis Interview Question

Suppose you have a portfolio of 100 options. Then I give you a subset of trades in which you can make. The trades consist of possible buys/sells of different options from different clients. Discuss ...
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175 views

What is the strategy for this piece of information

Heavy Math background, very light finance background: Suppose I have a stock $S$ whose price is measured by the market once on times $t_0$ $t_1$ $t_2$. Now the market has some opinion for how the ...
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1answer
73 views

Examination of Betting Against Beta

http://pages.stern.nyu.edu/~lpederse/papers/BettingAgainstBeta.pdf In this article the authors explain a theory/strategy called Betting Against Beta. My background is more in Math rather than finance ...
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2answers
76 views

name of this portfolio optimization strategy

I have come across a portfolio selection strategy that buys in equal amounts the top decile of expected earners, and simultaneously short sells the lowest decile in a similar fashion. What is this ...
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43 views

optimal tracking error allocation from Blitz and Hottinga

Just curious how to derive the optimal tracking error allocation in Blitz and Hottinga "Tracking error allocation" JPM 2001 Vol. 27 4 p19-26 research paper? (SSRN) From blitz and hottinga's paper, ...
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1answer
48 views

Dynamic asset allocation strategies using a stochastic dynamic programming approach

I am currently reading Gerd Infanger's Chapter 5 on "Dynamic asset allocation strategies using a stochastic dynamic programming approach" in the Handbook of Asset and Liability Management edited by S....
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92 views

Portfolio risk analysis

I would like to ask you if somone knows how to generate risk measures (such as VaR, Beta, Drawdown, Volatility, etc...) over a Portfolio that hold positions for approximately 7 working days. Imagine ...
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2answers
93 views

r: analyse series of historical positions as portfolio using 'standard' tools

I have a series of historical trading positions in the form Symbol OpenPrice OpenDate InvestmentInDollars CloseDate ReturnInDollars I need to evaluate the ...
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80 views

Market Maker portfolio management

I am interested in articles/strategies related to portfolio and inventory management for Market Maker and to management of order cancellation, updates of order, etc. Most of the strategies from ...
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1answer
40 views

Risk attribution model without weights data

I was just wondering if there are risk attribution model that does not require the asset weights data. It appears that most risk attribution models do require asset weight data. I am looking for model ...
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1answer
76 views

Preference between low (zero) and negative correlation

I am trying to create an artificial score grading user's portfolio correlation. In terms of diversification, lower correlation is obviously better. However, should negative correlation get a higher ...
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0answers
31 views

Benchmarking of Portfolio weights

I have 5 stocks and a commodity in my portfolio which I have allocated based on maximum Sharpe Ratio optimization. I need to benchmark them against an Index and compare the portfolio weights. How do I ...
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54 views

Constrained Optimization for performance attribution

I am trying to perform constrained opmitization for portfolio performance attribution analysis. Specifically, I am trying to determine the impact of sectors performance on the S&P 500 index. Min ...
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95 views

Calculating Ex-Post Sharpe Ratio

I'm trying to calculate an Ex-Post Sharpe Ratio for my portfolio and I would appreciate verification I'm doing it correctly. I have my portfolio's daily returns in one column and my benchmark's ...
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32 views

How to compute the portfolio risk when weights are negative?

In QMiF (p. 239) , the variance of a portfolio is defined as: V(R) = w'Vw = w'DCDw = x'Cx Does this formula hold if the weights are negative (i.e., short)? For example, if I have a 5x5 covariance ...
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1answer
245 views

Absorption ratio by Mark Kritzman

In Principal Components as a measure of systemic risk, the author Mark Kritzman defines absorption ratio (AR) as the fraction of the total variance of a set of asset returns explained or absorbed by a ...
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51 views

Problems with Black-Litterman: negative portfolio weights, and very poor returns

I am trying to implement the Black-Litterman model using own-defined views matrix (from consensus analysts). However, I have encountered the problems of negative portfolio weights in some periods, and ...
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43 views

Convert long/short stock portfolio into one sector ETF position

Assuming a portfolio contains long and short positions in stocks that are in the same sector, is it possible to create a similar overall position using only the sector ETF to which the constituents ...
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0answers
77 views

What to use for Tracking error minimization

What programs/packages can one use to minimize a portfolio's tracking error? What I am trying to do is see what ex post TE, portfolio returns and variance can be achieved when adding CSR constraints ...
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2answers
65 views

Calculation VaR on long term period

I'm calculating VaR numbers from historical data for a single instrument (it's plain vanilla, not a derivative) and receive such variables: I could provide necessary data, and formulas but I guess ...
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1answer
76 views

Portfolio correlation of a long-short portfolio

I have a portfolio of long/short positions in stocks. I would like to calculate the portfolio correlation. Should I somehow account for the short position while calculating the portfolio correlation? ...
3
votes
1answer
144 views

Portfolio forward return

I am working on a project which needs to find portfolio return for the next m months. To begin, let say investor hold a portfolio of $N$ stocks with weight $w_i$ invested in stock $i$, what is the ...
2
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0answers
25 views

z-score of an active return with a no-volatility benchmark

I don't know how to approach the problem I am having. Basically, the statement I am trying to make is: the fund's return is X standard distribution away from the mean. Normally, for a single fund, ...
3
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1answer
102 views

Ledoit Wolf shrinkage with constant correlation prior with tawny and Riskporfolios

I am trying to use R to perform the shrinkage of covariance matrix towards constant correlation as defined in 'Honey, I Shrunk the Sample Covariance Matrix'. I see there are two packages where this ...
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1answer
76 views

Portfolio turnover [closed]

Really easy question, but I am having doubts. If you want annual turnover, and you have monthly weights, wouldn't you just do in excel: {=ABS(CurrentMonthsWeights-LastMonthsWeights)*12} for each ...
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3answers
108 views

Measuring alpha (Academia vs the Industry)

During academia, I learned to evaluate the performance of a portfolio by calculating alpha as the following: $\alpha_{i} = (R_{it}-R_{ft})-[\beta_i(R_{BMK_t}-R_{ft})]$ where $\alpha_i$ and $\beta_i$ ...
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0answers
64 views

difference between Meucci fully flexible probability and markov regime swtiching models?

What is the difference between A. Meucci's Fully Flexible Probability (FFP) and Markov Regime Switching Models ? They seem very similar to me, FFP based on state variables that define regimes will ...
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1answer
66 views

Portfolio duration

What is the correct way to calculate duration of a fixed income portfolio with long and short bond positions? And how to calculate portfolio YTM with long and short positions. For long only (or short ...
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3answers
211 views

Fund size and alpha

During my research I found that fund active returns (alpha), measured by Fama and French four factor model, decreases as the fund increases in size (asset under management). What are some reasons ...
3
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1answer
92 views

Portfolio volatility of discontinuous portfolio

I would like to calculate an investor's average portfolio volatility as a measure of risk aversion. My problem is, that the portfolios are not continuous: the investor can have an open position for ...
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0answers
28 views

Portfolio Immunization from Yield Perspective

Let's say we have the following situation: an asset (mortgage) with fixed payments, a prepayment & oas models to run through, and calculations for duration, convexity, and price, based on them. ...
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40 views

How to pick one stock in each asset class when Rebalancing

A little background, I'm using Python's PyAlgoTrade library to develop a trading strategy. I have access to each stock's Open, High, Low, Close (/Adj), and Volume for a given day. Currently, I ...
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48 views

How to allocate additional capital to an already fully balanced portfolio?

Most sources seem to talk about allocating a fixed amount of capital to a portfolio, and then periodically rebalancing it, as far as i can tell. Assuming an already balanced portfolio, how would one ...
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1answer
195 views

Active Portfolio Management: What is the logic behind this equation? [closed]

In the CFA Curriculum Level II Readings (link) it is stated without further comment that: $(SR_{p})^2 = (SR_{b})^2 + IR^2 $ where, $(SR_{p})$ = Sharpe Ratio of an actively managed portfolio; $(...
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30 views

Proper Equity and FX CFD Long-Short portfolio proportions definition

I am very new to Quantitative Finance, although I have somewhat experience in trading CFDs. I am trying to create a Market Risk Management Tool in Excel VBA that should calculate CVaR of a mixed ...
1
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1answer
49 views

Testing the accuracy of a created Index

So long story short, I created a Oil/Energy Index from a basket of 5 stocks in the asset class. I am looking to use mean-reversion, in order to help rebalance the allocation of funds between ...
0
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1answer
55 views

Volatility of a leveraged CFD portfolio

I want to calculate the portfolio volatility (as a weighted average of the products) and the portfolio consists of CFD contracts with multipliers ranging from 10 to 50 depending on the underlying ...
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0answers
74 views

Beta of options based strategy

This is probably a simple/dumb question, but I am not getting it. As per GMO's recent Insight: Second, as can be inferred from Exhibit 1, put writing strategies have a low beta to the equity ...
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34 views

Continuous returns in BS-market

Let's assume we are in a Black-Scholes market. The price processes in the BS-market are given by $dP_0(t)=P_0(t)rdt, P_0(0)=1$ $dP_i(t)=P_i(t)\cdot(\mu_i dt + \sigma_idW(t))=P_i(t)\cdot \left(\...