Tag Archive | "portfolio"

US portfolio recom. 5, March 2012

US portfolio recom. 5, March 2012

The portfolio recommendation is based on two low-volatility strategies: a long-only minimum-variance portfolio and a“130:30” minimum-variance portfolio, which is long 130% and short 30%.
These strategies use advanced Optimization and Statisticstechniques to hedge against the estimation risk of the associated models. As a result, they attain consistently better risk-adjusted returns than market indexes, as these portfolio recommendations show.
For more details about the implementation of these strategies, please read the following post: Some efficient low-volatility portfolios: the minimum-variance policy.

The long-only and the 130:30 low-volatility portfolios recommended for this week, with their corresponding weights, can be found in this file:US_weights_20120305.csv

Although I recommend a portfolio composition every month, it is desirable to maintain this composition for a quarter year, and then rebalance with the new composition.
The current long-only portfolio composition has changed a bit respect to the previous quarter (one more stock has been purchased). The turnover is 15% (due to the portfolio growth and the new purchase). On the other hand, the turnover of the current 130:30 portfolio is a bit larger: 26%.

Regarding the performance, over the last year (52 weeks), the long-only strategy attained a volatility of 11.3% (versus 21.3% of the S&P 500). The volatility of the 130:30 strategy is even better: 9.5%.

The weekly 95%-VaR of the long-only portfolio was 2.1% (versus 4.7% of the S&P 500). The corresponding VaR for the 130:30 portfolio was 1.7%.

The last year annualized Sharpe ratio of the long-only strategy was 1.06 (after proportional transaction costs of 40 bps were discounted). On the other hand, the SR of the 130:30 strategy was 1.67. Finally, the SR of the S&P 500 was 0.27 over the same period.

In the next figure, you can see the compounded return over the last 52 weeks of the three considered portfolios.

Both low-volatility portfolios attain better returns than those of the S&P 500.

But let add information about the risk. The next graph shows the risk-return space for the three considered portfolios.

The red point represents the mean return and volatility of the long-only portfolio over the past 52 weeks. On the other hand, the green point represents the 130:30 portfolio, and finally the blue point represents the S&P 500 index over the same 52 past weeks.

We can see the two low-volatility portfolios have better mean returns than that of the S&P 500, and also their volatilities are better. In this case, we say the low-vol portfolios dominate the index.

I have computed the same risk-return space for every week over the last year, using the same 52-weeks historical method to estimate the mean returns and the volatilities. The long-only and 130:30 portfolios attained a higher return than that of the S&P 500 (100% and 96% of the time, respectively). Moreover, the volatility of both low-vol portfolios wasalways less than that of the S&P 500.

As a summary, the low-volatility strategies dominate the market index most of the time, showing they attain consistently better risk-adjusted returns.

Posted in Francisco J. Nogales, TradingComments (0)

US portfolio recom. 6, February 2012

US portfolio recom. 6, February 2012

The portfolio recommendation is based on two low-volatility strategies: a long-only minimum-variance portfolio and a“130:30” minimum-variance portfolio, which is long 130% and short 30%.
These strategies use advanced Optimization and Statistics techniques to hedge against the estimation risk of the associated models. As a result, they attain consistently better risk-adjusted returns than market indexes, as these portfolio recommendations show.
For more details about the implementation of these strategies, please read the following post: Some efficient low-volatility portfolios: the minimum-variance policy.

The long-only and the 130:30 low-volatility portfolios recommended for this week, with their corresponding weights, can be found in this file:US_weights_20120206.csv

Although I recommend a portfolio composition every month, it is desirable to maintain this composition for a quarter year, and then rebalance with the new composition.
The current long-only portfolio composition has not changed respect to the previous quarter. The turnover is 12% (due to the portfolio growth). On the other hand, the turnover of the current 130:30 portfolio is a bit larger: 30%.

Regarding the performance, over the last year (52 weeks), the long-only strategy attained a volatility of 11.3% (versus 21.6% of the S&P 500). The volatility of the 130:30 strategy is even better: 9.5%.

The weekly 95%-VaR of the long-only portfolio was 2.2% (versus 4.7% of the S&P 500). The corresponding VaR for the 130:30 portfolio was 1.9%.

The last year annualized Sharpe ratio of the long-only strategy was 1.39 (after proportional transaction costs of 40 bps were discounted). On the other hand, the SR of the 130:30 strategy was 1.59. Finally, the SR of the S&P 500 was 0.34 over the same period.

In the next figure, you can see the compounded return over the last 52 weeks of the three considered portfolios.

Both low-volatility portfolios attain better returns than those of the S&P 500.

But let add information about the risk. The next graph shows the risk-return space for the three considered portfolios.

The red point represents the mean return and volatility of the long-only portfolio over the past 52 weeks. On the other hand, the green point represents the 130:30 portfolio, and finally the blue point represents the S&P 500 index over the same 52 past weeks.

We can see the two low-volatility portfolios have better mean returns than that of the S&P 500, and also their volatilities are better. In this case, we say the low-vol portfolios dominate the index.

I have computed the same risk-return space for every week over the last year, using the same 52-weeks historical method to estimate the mean returns and the volatilities. The long-only and 130:30 portfolios attained a higher return than that of the S&P 500 (100% and 88% of the time, respectively). Moreover, the volatility of both low-vol portfolios was always less than that of the S&P 500.

As a summary, the low-volatility strategies dominate the market index most of the time, showing they attain consistently better risk-adjusted returns.

Posted in Francisco J. Nogales, TradingComments (0)

US portfolio recom. 9, January 2012

US portfolio recom. 9, January 2012

The portfolio recommendation is based on two low-volatility strategies: a long-only minimum-variance portfolio and a“130:30” minimum-variance portfolio, which is long 130% and short 30%.

These strategies use advanced Optimization and Statistics techniques to hedge against the estimation risk of the associated models. As a result, they attain consistently better risk-adjusted returns than market indexes, as these portfolio recommendations show.

For more details about the implementation of these strategies, please read the following post: Some efficient low-volatility portfolios: the minimum-variance policy.

The long-only and the 130:30 low-volatility portfolios recommended for this week, with their corresponding weights, can be found in this file:US_weights_20120110.csv

Although I recommend a portfolio composition every month, it is desirable to maintain this composition for a quarter year, and then rebalance with the new composition.

The current long-only portfolio composition is very similar to that of previous quarter, except for two stocks bought (out of 20). The turnover is 17% (due to the portfolio growth and the trading of these two companies). On the other hand, the turnover of the current 130:30 portfolio is a bit larger: 32%.

Regarding the performance, over the last year (52 weeks), the long-only strategy attained a volatility of 11.5% (versus 21.5% of the S&P 500). The volatility of the 130:30 strategy is even better: 9.6%.

The weekly 95%-VaR of the long-only portfolio was 2.1% (versus 4.7% of the S&P 500). The corresponding VaR for the 130:30 portfolio was 1.9%.

The last year annualized Sharpe ratio of the long-only strategy was 1.11 (after proportional transaction costs of 40 bps were discounted). On the other hand, the SR of the 130:30 strategy was 1.49. Finally, the SR of the S&P 500 was 0.18 over the same period.

In the next figure, you can see the compounded return over the last 52 weeks of the three considered portfolios.

 

 

 

 

 

 

 

 

 

 

 

 

Both low-volatility portfolios attain better returns than those of the S&P 500.
But let add information about the risk. The next graph shows the risk-return space for the three considered portfolios.

 

 

 

 

 

 

 

 

 

 

 

 

The red point represents the mean return and volatility of the long-only portfolio over the past 52 weeks. On the other hand, the green point represents the 130:30 portfolio, and finally the blue point represents the S&P 500 index over the same 52 past weeks.

We can see the two low-volatility portfolios have better mean returns than that of the S&P 500, and also their volatilities are better. In this case, we say the low-vol portfolios dominate the index.
I have computed the same risk-return space for every week over the last year, using the same 52-weeks historical method to estimate the mean returns and the volatilities. The long-only and 130:30 portfolios attained a higher return than that of the S&P 500 (100% and 85% of the time, respectively). Moreover, the volatility of both low-vol portfolios wasalways less than that of the S&P 500.
As a summary, the low-volatility strategies dominate the market index most of the time, showing they attain consistently better risk-adjusted returns.

Posted in Francisco J. Nogales, TradingComments (0)

Fun & Finance Capítulo 18: Charla sobre Traders

Fun & Finance Capítulo 18: Charla sobre Traders

 

En este capítulo, Leandro -vía Skype desde NY- le explica a Gaston qué es el Alfa, cómo es la generación del mismo, qué diferencias existen entre un trader tradicional y un trader de Alta Frecuencia.

Siempre Mejor en HD

No se olviden de visitar la pagina de Fun & Finance  en Facebook

Posted in Gaston Besanson, Top Stories, VideosComments (0)

Paper: Cartera de bonos, Manejo de riesgo soberano

Paper: Cartera de bonos, Manejo de riesgo soberano

Managing Sovereign Credit Risk in Bond Portfolios

Abstract:      
With the recent development of the European debt crisis, traditional index bond management has been severely called into question. We focus here on the risk issues raised by the classical market-capitalization weighting scheme. We propose an approach to properly measure sovereign credit risk in a fixed-income portfolio. For that, we assume that CDS spreads follow a SABR process and we derive a sovereign credit risk measure based on CDS spreads and duration of portfolio bonds. We then consider two alternative weighting methods which are fundamental indexation and risk-based indexation. Fundamental indexation is based on GDP indexation whereas risk-based indexation uses a risk-budgeting approach based on our sovereign credit risk measure. We then compare all these methods in terms of risk, diversification and performance. We show that the risk-budgeting approach is the most appropriate scheme to manage sovereign risk in bond portfolios and gives very appealing results with respect to active management of bond portfolios.

Link al Paper

Posted in Gaston Besanson, PaperComments (0)

US portfolio recom. 5, December 2011

US portfolio recom. 5, December 2011

The portfolio recommendation is based on two low-volatility strategies: a long-only minimum-variance portfolio and a“130:30” minimum-variance portfolio, which is long 130% and short 30%.
These strategies use advanced Optimization and Statisticstechniques to hedge against the estimation risk of the associated models. As a result, they attain consistently better risk-adjusted returns than market indexes, as these portfolio recommendations show.
For more details about the implementation of these strategies, please read the following post: Some efficient low-volatility portfolios: the minimum-variance policy.
The long-only and the 130:30 low-volatility portfolios recommended for this week, with their corresponding weights, can be found in this file:US_weights_20111205.csvAlthough I recommend a portfolio composition every month, it is desirable to maintain this composition for a quarter year, and then rebalance with the new composition.

The current long-only portfolio composition is very similar to that of previous quarter, except for one stock sold and other bought (out of 20). The turnover is 17% (due to the portfolio growth and the trading of these two companies). On the other hand, the turnover of the current 130:30 portfolio is a bit larger: 23%.Regarding the performance, over the last year (52 weeks), the long-only strategy attained a volatility of 11.7% (versus 21.1% of the S&P 500). The volatility of the 130:30 strategy is even better: 9.7%.

The weekly 95%-VaR of the long-only portfolio was 2.0% (versus 4.7% of the S&P 500). The corresponding VaR for the 130:30 portfolio was 1.9%.
The last year annualized Sharpe ratio of the long-only strategy was 1.24 (after proportional transaction costs of 40 bps were discounted). On the other hand, the SR of the 130:30 strategy was 1.47. Finally, the SR of the S&P 500 was 0.31 over the same period.
In the next figure, you can see the compounded return over the last 52 weeks of the three considered portfolios.

 

Both low-volatility portfolios attain better returns than those of the S&P 500.
But let add information about the risk. The next graph shows the risk-return space for the three considered portfolios.

The red point represents the mean return and volatility of the long-only portfolio over the past 52 weeks. On the other hand, the green point represents the 130:30 portfolio, and finally the blue point represents the S&P 500 index over the same 52 past weeks.
We can see the two low-volatility portfolios have better mean returns than that of the S&P 500, and also their volatilities are better. In this case, we say the low-vol portfolios dominate the index.

I have computed the same risk-return space for every week over the last year, using the same 52-weeks historical method to estimate the mean returns and the volatilities. The long-only and 130:30 portfolios attained a higher return than that of the S&P 500 (100% and 84% of the time, respectively). Moreover, the volatility of both low-vol portfolios was always less than that of the S&P 500.

As a summary, the low-volatility strategies dominate the market index most of the time, showing they attain consistently better risk-adjusted returns.

Posted in Francisco J. Nogales, TradingComments (0)

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