Maximum weight was constrained to 4% at the start of 2007, how does that grow when unhindered? Previously “Low (and high) volatility strategy effects” created 6 sets of random portfolios as of 2007 and showed their performance up to about a month ago. “Rebalancing the low vol cohorts” looked at how much turnover was required to move back to the constraints.  This post looks at one of those constraints — how far away from the maximum weight of 4% have we drifted? Pictures...

The subtitle is “Central banks, credit bubbles and the efficient market fallacy”. Executive summary This is much too important of a book to remain as obscure as it is.  Besides, it is quite a fun read. It talks about two subjects: Why markets for goods and services tend toward equilibrium but financial markets do not. Why central banks are useful and what they should do (which they currently don’t). Market stability The story is well known about how supply and demand work...

A bit of testing of the estimation of the variance matrix for S&P 500 stocks in 2011. Previously There was a plot in “Realized efficient frontiers” showing the realized volatility in 2011 versus a prediction of volatility at the beginning of the year for a set of random portfolios.  A reader commented to me privately that they expected the plot not to be so elliptical — that they expected there to be higher dispersion for high volatility portfolios. My initial hypothesis...

Most popular posts in 2012 February What does ‘passive investing’ really mean The BurStFin R package The distribution of financial returns made simple The top 7 portfolio optimization problems A tale of two returns (posted in 2010) The US market will absolutely positively definitely go up in 2012 A slice of S&P 500 kurtosis history A slice of S&P 500 skewness history The number 1 novice quant mistake (posted in 2011) Review of “Models. Behaving. Badly.” by...