Flirting with Models

The Research Library of Newfound Research

Month: March 2013

New White Paper: “Allocating Under Uncertainty: Simple Heuristics & Complex Models”

Optimal portfolios can underperform more naive constructions due to parameter uncertainty and instability over time.

Visualizing Increased Correlations During Market Crashes

Correlations often increase during market crashes. Static asset allocation cannot weather a scenario like this, but tactical asset allocation can.

Returns Don’t Care About Time

The distribution of returns over time is far from static. Using a dynamic window to measure momentum reduces the risk of missing investment opportunities.

The Stability of Returns, Volatility, and Correlation

Return, volatility, and correlations exhibit varying degrees of stability over time. Using stable measures in portfolio construction makes it more robust.
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