Flirting with Models

Research Library of Newfound Research

Tag: mean-variance optimization

Directionally Right and Precisely Wrong

Portfolio construction decisions tell us about more than just our objective: they tell us about our beliefs. But what if we're not 100% certain?

Managing Capital Market Assumption Risk

A robust portfolio is better than an optimal one. Mitigating the risk of incorrect capital market assumptions is important in mean variance optimization.

What do your weights say about your return beliefs? (with Excel Workbook)

Here is a method to see if the implied returns on assets from strategic allocations in the mean variance optimization framework agree with your beliefs.

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.

“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.
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