Posts Tagged ‘ Quant finance ’

A brief history of S&P 500 beta

September 8, 2011
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A brief history of S&P 500 beta

Data The data are daily returns starting at the beginning of 2007.  There are 477 stocks for which there is full and seemingly reliable data. Estimation The betas are all estimated on one year of data. The times that identify the betas mark the point at which the estimate would become available.  So the betas … Continue reading...

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Realized beta and beta equal 1

August 30, 2011
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Realized beta and beta equal 1

What does beta look like in the out-of-sample period for the portfolios generated to have beta equal to 1? In the comments Ian Priest wonders if the results in “The effect of beta equal 1″ are due to a shift in beta from the estimation period to the out-of-sample period.  (The current post will make … Continue reading...

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The effect of beta equal 1

August 29, 2011
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The effect of beta equal 1

Investment Performance Guy had a post about beta equal 1.  It made me wonder about the properties of portfolios with beta equal 1.  When I looked, I got a bigger answer than I expected. Data I have some S&P 500 data lying about from the post ‘On “Stock correlation has been rising”‘.  So laziness dictated … Continue reading...

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More S&P 500 correlation

July 28, 2011
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More S&P 500 correlation

Here are some additions to the previous post on S&P 500 correlation. Correlation distribution Before we only looked at mean correlations.  However, it is possible to see more of the distribution than just the mean.  Figures 1 and 2 show several quantiles: 10%, 25%, 50%, 75%, 90%. Figure 1: Quantiles of 50-day rolling correlation of … Continue reading...

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On “Stock correlation has been rising”

July 17, 2011
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On “Stock correlation has been rising”

Ticker Sense posted about the mean correlation of the S&P 500. The plot there — similar to Figure 1 — shows that correlation has been on the rise after a low in February. Figure 1: Mean 50-day rolling correlation of S&P 500 constituents to the index. For me, this post raised a whole lot more … Continue reading...

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Selections from the R/Finance conference

June 2, 2011
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Selections from the R/Finance conference

The R/Finance conference happened in Chicago at the end of April.  If, like me, you weren’t there, you can still benefit from it because slides from many of the talks are now online. Here is a quick synopsis (in chronological order) of some of the talks I found most interesting. Michael Kane Michael Kane and … Continue reading...

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Specific differences between Ledoit-Wolf and factor models

May 22, 2011
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Specific differences between Ledoit-Wolf and factor models

What can we learn about the difference in structure between a Ledoit-Wolf variance matrix and a corresponding factor model variance? Previously We’ve generated a set of random portfolios with constraints on the risk fractions of a Ledoit-Wolf variance matrix, and a corresponding set of random portfolios with risk fraction constraints from a statistical factor model. … Continue reading...

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Again with Ledoit-Wolf and factor models

May 4, 2011
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Again with Ledoit-Wolf and factor models

We come closer to a definitive answer on the relative merit of Ledoit-Wolf shrinkage versus a statistical factor model for variance matrices. Previously This post builds on the post entitled: A test of Ledoit-Wolf versus a factor model That post depended on some posts previous to it. New information Previously we generated random portfolios with … Continue reading...

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A test of Ledoit-Wolf versus a factor model

April 27, 2011
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A test of Ledoit-Wolf versus a factor model

Statistical factor models and Ledoit-Wolf shrinkage are competing methods for estimating variance matrices of returns.  So which is better?  This adds a data point for answering that question. Previously There are past blog posts on: the idea of variance matrices factor models of variance The data in this post are from the blog posts: “Weight … Continue reading...

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Risk fraction constraints and volatility

April 21, 2011
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Risk fraction constraints and volatility

What is the effect on predicted and realized volatility of substituting risk fraction constraints for weight constraints? Previously This post depends on two previous blog posts: “Unproxying weight constraints” “Weight compared to risk fraction” The exact same sets of random portfolios are used in this post that were generated in the second of these. Payoff … Continue reading...

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