Flirting with Models

The Research Library of Newfound Research

Month: February 2013

The Intuition Behind Sharpe Maximization in Unconstrained Mean-Variance Optimization

In this post, we develop a simple intuition for interpreting maximum Sharpe ratio portfolios for both correlated and uncorrelated assets.

“Big Data” and Complicated Models

"Big data" can lead to very complicated models that are prone to overfitting. Simply knowing what we don't know can be much safer than thinking we know.

The Importance of Benchmarking in Strategy Evaluation

Appropriately benchmarking a strategy allows us to evaluate it on an even playing field. All managers should be asked why they chose particular benchmarks.

Portfolio thoughts from Antifragile

In Taleb's book, Antifragile, he asserts that uncertainty is often desirable. In a portfolio, we can take convex bets on volatility to make it antifragile

As January goes, so goes the year?

The January effect is commonly cited as a rule, but it gives no statistically valid forward information about the remainder of the year's performance.
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