Hot off the press: Allocating Under Uncertainty: Simple Heuristics & Complex Models.

In this paper we explore several forms of optimally constructed portfolios versus naive competitors and find that in most cases, the naive competitors are either superior or equivalent to the more complex construction methodologies.  We hypothesize that this occurs due to parameter instability: as optimization occurs through a rear-view mirror, and if parameters do not exhibit enough self and relational stability, the portfolio constructed could actually be woefully sub-optimal for future market environments.

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Corey is co-founder and Chief Investment Officer of Newfound Research, a quantitative asset manager offering a suite of separately managed accounts and mutual funds. At Newfound, Corey is responsible for portfolio management, investment research, strategy development, and communication of the firm's views to clients. Prior to offering asset management services, Newfound licensed research from the quantitative investment models developed by Corey. At peak, this research helped steer the tactical allocation decisions for upwards of $10bn. Corey holds a Master of Science in Computational Finance from Carnegie Mellon University and a Bachelor of Science in Computer Science, cum laude, from Cornell University. You can connect with Corey on LinkedIn or Twitter.