717 search results for "finance"

The top 7 portfolio optimization problems

January 5, 2012
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The top 7 portfolio optimization problems

Stumbling blocks on the trek from theory to practical optimization in fund management. Problem 1: portfolio optimization is too hard If you are using a spreadsheet, then this is indeed a problem. Spreadsheets are dangerous when given a complex task.  Portfolio optimization qualifies as complex in this context (complex in data requirements). If you are … Continue reading...

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Were markets exceptionally volatile in 2011?

January 2, 2012
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Were markets exceptionally volatile in 2011?

2011 was a volatile year, no doubt about that, but was it exceptionally so from a historic point of view? To quantify the volatility, I used the Dow Jones Industrial average, which goes back to 1928 on Yahoo Finance: A volatile year no doubt, but once again confirming the fact that, in markets behaviour at

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You’ve got the whole world in your portfolio

December 29, 2011
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You’ve got the whole world in your portfolio

A famous finance professor once told us that good diversification meant holding everything in the world. Fine, but in what proportion? Suppose you could invest in every country in the world. How much would you invest in each? In a market-capitalization weighted index, you'd invest in each country in proportion to the market value of its investments (its "market capitalization")....

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R-specific review of blog year 2011

December 28, 2011
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R-specific review of blog year 2011

Most popular posts Two of the ten most popular posts during the year were completely about R: The R Inferno revised (number 6) Solve your R problems (number 9) R played a role in the other eight top ten, and many of the rest of the posts as well. R The R Inferno was revised … Continue reading...

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Modelling returns using PCA : Evidence from Indian equity market

December 26, 2011
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As my finance term paper, I investigated an interesting question where I tried to identify macroeconomic variables that explain the returns on equities. Much of the debate has already taken place on this topic which has given rise to two competing theo...

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Portfolio Optimization in R, Part 4

December 23, 2011
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Portfolio Optimization in R, Part 4

This post will conclude the portfolio optimization series.  In this post, we will construct a trading strategy based on portfolio optimization and test the results against the CAPM market portfolio as well as another strategy.It is worth reiterati...

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Pairs Trading Issues

December 20, 2011
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Pairs Trading Issues

(This article was first published on Eran Raviv » R, and kindly contributed to R-bloggers) A few words for those of you who are not familiar with the “pairs trading” concept. First you should understand that the movement of every stock is dominated not by the companies performance but by the general market movement. This is the origin of...

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The Bay Area R User Group Meeting on Data Mining with R

December 16, 2011
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By Joseph Rickert Put up a poster that says something like “Data Mining with R” anywhere in the Bay Area and you will surely draw a crowd. But it was still a bit of a surprise that the monthly meeting of the Bay Area R User’s group was so well attended. At one point there were 160 people on...

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Backtesting Rebalancing methods

December 15, 2011
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Backtesting Rebalancing methods

I wrote about Rebalancing in the Asset Allocation Process Summary post. Deciding how and when to rebalance (update the portfolio to the target mix) is one of the critical steps in the Asset Allocation Process. I want to study the portfolio performance and turnover for the following Rebalancing methods: Periodic Rebalancing: rebalance to the target

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With Size, Does Risk–>Return?

December 15, 2011
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With Size, Does Risk–>Return?

A basic tenet in finance is that higher risk should lead to higher return as the time horizon stretches to infinity.  However, in bonds, higher risk has not meant higher return with either credit risk (high-yield) or long duration risk (maturity &...

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