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Covariance Matrix by Multi-Factor Model

Let there be $n$ assets and $k$ factors in the market. We assume multivariate normally distributed factor returns $$ r_f\sim \mathrm{N}\left(\mu_f,\Sigma_f\right) $$ with $k\times k$ factor covariance ...
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0 votes

Are there optimal portfolio theories than instead of the expected value they were based on the Mode of distributions

Yes, I am proposing a new branch of stochastic calculus. It drops Ito's assumption that the parameters are known. There is a Bayesian branch and the conjecture of a Frequentist branch. It is ...
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In Mean-Variance Analysis, why not the efficient frontier being pushed to the left near the axis?

You have a good point there. Consider the case of uncorrelated assets, $N$ of them, and for simplicity assume they all have the same variance $\sigma^2$. You take an equally weighted portfolio now, ...
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1 vote

Is there a performance measure for the entire efficient frontier?

Probably under utilized is the Area Under the Curve (AUC or ROC). Assuming a straight level represents equal increments of reward and risk, measuring the mean variance line area under the curve (as ...
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1 vote

Is there a performance measure for the entire efficient frontier?

I remember that i saw an article using an numerical integral of the area below the efficient frontier to approximate the set of stochastically dominant portfolios for a given mean-variance combination ...
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  • 178
0 votes

How to see if a set of asset returns corresponds to a known correlation matrix?

The short answer is “no.” The long answer is, “it depends on what you intend to do with the ranking.” First, let us ignore asset classes because you are assuming something that is a priori impossible....
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