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Most papers in the financial literature estimate the p-value associated with an investment strategy, without reporting the power of the test used to make that discovery. In this paper we provide analytic estimates to Type I and Type II errors for the Sharpe ratios of investments, and derive...
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With the advent in recent years of large financial data sets, machine learning and high-performance computing, analysts can backtest millions (if not billions) of alternative investment strategies. Backtest optimizers search for combinations of parameters that maximize the simulated historical...
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Correlation matrices are ubiquitous in finance. Some key applications include portfolio construction, risk management, and factor/style analysis. Correlation matrices are usually estimated from historical empirical observations or derived from historically estimated factors. It is widely...
Persistent link: https://www.econbiz.de/10012859763
Standard methods for optimal allocation of shares in a financial portfolio are determined by second-order conditions which are very sensitive to outliers. The well-known Markowitz approach, which is based on the input of a mean vector and a covariance matrix, seems to provide questionable...
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