A collection of my publications, ongoing ideas, how-tos, and plenty of R code. All R-related topics are pushed to R-bloggers.
Probably the most popular models in modern investment management are factor models. Growing out of the Capital Asset Pricing Model (CAPM), factor models were first theorized in Arbitrage Portfolio Theory and the concept was expanded and applied to risk premiums by Nobel-laureate Eugene Fama and Kenneth French (French, surprisingly, did NOT win a Nobel prize). […]
Growing up on a cattle ranch in central Texas, I developed a certain respect for the tools of the trade. Horses, tractors, trucks, trailers, bailing wire, and duct tape we all daily-use items for us. Each tool has its purpose, of course, and each tool has advantages and disadvantages for a particular job. Take, for […]
I spend quite a bit of time at work trying to understand where we are in the business cycle. That analysis informs our capital market expectations, and, by extension, our asset allocation and portfolio risk controls. For years now I have used a trusty old linear regression model, held together with bailing wire, duct tape, […]
Traditional portfolio optimization (often called modern portfolio theory, or mean-variance optimization) balances expected portfolio return with expected portfolio variance. You input how opposed you are to portfolio variance (your risk tolerance), then you build a portfolio that gives you the best return given your risk tolerance. Goals-based investing, by contrast, defines “risk” as the probability […]
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