muffin1974
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Integrated volatility
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4 votes

In a standard approach you would think about the evolution of a return process in the following form: $$dr_t=\mu dt+\sigma dW_t,$$ where for the sake of simplicity I assumed constant volatility and ...

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Bayesian or Frequentist in Finance?
3 votes

Although I like the other answers to this question I think, there are some points which may be interesting to note and should get attention as well. Let me address each of your individual questions. ...

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Why optimize.portfolio in R package PortfolioAnalytics is not working?
3 votes

There are some issues with your code - you are using wrong variables as inputs/ in case you are not sure what the function arguments mean, search online for a documentation of the PortfolioPerformance ...

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What is the risk-free asset?
3 votes

Well, I do not think there is a large difference: Given you deposit money at a Bank the value of this deposit changes according to $$\frac{dB_t}{B_t} = r dt$$ which simply means there is no ...

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Transform raw forecasts into orthogonal forecasts
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3 votes

I do not have access to this book but I suppose the decomposition is the cholesky decomposition (if you use R, simply generate it with chol(cov(g)) where g is a matrix with forecasts. What the ...

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Two definitions of Beta
3 votes

As @Rosetta states in the comment above, I think the difference between the two formulas you represent can be explained by either focusing on estimating the coefficient $\beta$ or by taking into ...

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Calculate mean variance portfolio
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3 votes

There is one minor mistake: If you compute sum(mean.var) you'll obtain $-1$ instead of $1$. So it should be mean.var<-xt/sum(xt) in order to ensure that the weights sum up to one. The remainder ...

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Kenneth R. French data base on momentum and size: construction and how to use it concretely with momentum only
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3 votes

Let me start with a general point: Why do you want to use these datapoints if it is so hard to understand how they are constructed? First of all 4) I am not familiar with testing momentum strategies ...

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Dividend as a function of stock
3 votes

As a first Idea I would propose to incorporate basic ideas of Behavioural Finance and Dividend Theory into your considerations; for reference, look at: Baker, Malcolm, and Jeffrey Wurgler. ...

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On a source for a mean-variance portfolio optimization result
3 votes

You do note require a sum up constraint that gives you that the weights sum up to 1? Then the problem is equivalent to a maximization without constraints: $$Z(\omega)=w'\mu - \frac{\gamma}{2}w'Vw$$ ...

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On learning the bayesian approach to portfolio optimization
2 votes

As you are especially interested in applications in Finance I'll recommend this book of Rachev which focus on Bayesian Methods in Finance

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What does a negative coefficient of variation mean when calculated from daily returns during a period?
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2 votes

With coefficient of variation you refer to the relative standard deviation $\frac{\sigma}{\mu}$ I suppose? In this case, negative values occur, as your historical data exhibits a negative drift, ...

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Merton portfolio allocation problem proportions/weights >1 or <0?
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2 votes

Your statement should be correct, the weights into the risky asset are not bounded between $0$ and $1$. Essentially, by setting $r=0$ you omit the term which shows that your weights always sum up to ...

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Why is it cheaper to repay monthly loan at the start of the month
2 votes

If you make your repayment at the beginning of the month you do not have to pay accrued interest of the amount for the month. So, paying already 961.83$ at the first of each month makes a subtle ...

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Modern portfolio theory in practice
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2 votes

In literature you'll find many approaches to compute the variance. As mentioned already, the standard ideas are to use MLE, Shrinkage on the Covariance Matrix (Ledoit, Wolf), Shrinkage on the inverse ...

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history of market microstructure
1 votes

Have a look in the introduction of the book of @lehalle and Laruelle: Market Microstructure in Practice, there is an excellent overview in tabular form. Lehalle, Charles-Albert, and Sophie ...

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Proof for the Duplication Invariance property for the Most-Diversified portfolio
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1 votes

The introduction of a redundant assets means, that one of the existing assets is duplicated. So, in other words, you do not introduce an extra asset which changes the covariance matrix, but instead ...

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Cubic spline interpolation function within Matlab
1 votes

Why do you think this is not apropriate? Matlabs documentation for 1-D Data interpolation states that interpl1 using method spline is the right way to go: Spline interpolation using not-a-knot end ...

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Is there any package in R for conditional autoregressive range model (CARR)?
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1 votes

Welcome to quant.SE! I do not have specific experience with the CARR Model, however, I had a short look in the paper you mentioned: As far as I understand the model specification you just implement a ...

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Why/How does a hedged portfolio make profits?
1 votes

A perfectly hedged portfolio should not make any profits different from the risk free interest rate. However, you won't be able to hedge perfectly in the real world. Delta hedging for example requires ...

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Do I need simulink to model the risks of an option portfolio
1 votes

Well, I am not an expert in this field but I set up quite some simulation studies in Matlab and I never had to use Simulink before.

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How do I show that there is no tangency portfolio?
1 votes

Intuitively speaking this statement should be clear, as in case the risk-free rate is equal to the expected return of the global minimum variance portfolio you can just assume that the minimum ...

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Residuals in the Ljung box test
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1 votes

So you are asking whether the function Box.test requires standardized or raw residuals as input? I do not know this function but as you mention that the results change based on your input it should be ...

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Forecasting using GARCH in R
1 votes

This should follow from the properties of the forecast - for example the GARCH(1,1) forecast for $h$ steps is computing the conditional expectation of $\sigma^2_{t+h}$ based on the information set-up ...

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Corporate finance exercise book
1 votes

The famous textbook of Brealey Myers and Allen provides tons of exercises ranging from easy to understand up to quite hard problems for the whole range of Corporate Finance related topics.

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Bayes Stein Porfolio Implementation
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1 votes

The implementation is explained in more detail in the Horse - Race of DeMiguel: see here

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