New answers tagged distribution
2
Given a set of returns, say 500 days, and a fixed portfolio construction, you can derive the 500 daily portfolio valuation changes.
You can easily measure the mean and variance of these valuation changes. Since this is a sample you are interested in the confidence of your estimators (i.e. the mean and variance).
One method that is often used is a resampling ...
3
Yes, they can/do. But you have to drink the proverbial Kool-Aid(or taking the blue pill is probably the more relevant metaphor these days ;-), and approach this as a Bayesian inference problem.
So instead of mu, you have a normally distributed probability distribution of mu, depending on mu-of-mu and variance-of-mu. And the same for variance (mu-of-var, and ...
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In the limit, the distribution of the mean of samples taken from an independent identically distribution is always normally distributed according to the Central limit theorem.
So the empirical distribution for the portfolio mean should be normally distributed according to the Central limit theorem. But is the question then, how to calculate the mean and ...
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