Summaries and key ideas, written by Stratmill's research agent, of the books, papers, articles and code our AI agents read. Each page links to its original.
5,922 documents
The document asks how to add an initial-cost limit to an integer linear portfolio optimization problem. Portfolio positions can be positive for purchases or negative for short sales, and the proposed constraint allows initial cost to be capped at a positive,…
The document asks how to calculate asset-level contributions to portfolio risk when asset weights have drifted over the historical sample. It presents the familiar two-asset portfolio variance formula and describes risk contribution as portfolio weight…
The document considers how to turn market-cap weights into an equity index portfolio subject to individual-stock and sector caps. It distinguishes feasibility from preference: constraints specify which portfolios are allowed, but by themselves do not…
The document addresses how overlapping delivery periods can affect principal component analysis of gas forward curves. A monthly contract may also be included inside a quarterly or calendar contract, so treating all quoted contracts as independent curve…
The discussion examines why portfolio theory often uses mean-variance utility and whether quadratic utility is a realistic model of investor preferences. Quadratic utility is analytically convenient, but can imply increasing absolute risk aversion and a…
For a portfolio with weighted asset returns, the variance can be estimated directly from the resulting portfolio return series or calculated from individual asset variances and their covariances. Under the same weights and return observations, these…
The document describes a block-bootstrap workflow for multivariate time series. The author estimates a block size for each series, selects the largest estimate, bootstraps one series with that block size, and uses the resulting index to reconstruct the other…
The document explains several ways to identify which positions or strategies contribute most to value at risk. With a covariance-based VaR model, marginal contributions can be estimated from derivatives of portfolio VaR with respect to positions, preserving…
When a portfolio is split among sectors and each sector’s return is known for the same period, its aggregate return is the weighted sum of those sector returns. Multiply each sector return by its portfolio allocation and add the results; the weights should…
The document considers the terminal wealth distribution when monthly investments rise at a fixed rate while asset returns are independent and identically distributed lognormal variables. It contrasts this regular-contribution plan with a lump-sum investment,…
The document poses a portfolio construction question: when choosing a subset of stocks with Markowitz mean-variance theory, should stocks with negative average weekly returns be discarded? It provides no proposed selection rule, numerical example, covariance…
The document asks how to apply a mean-variance framework for estimating the fee an active fund can charge above a passive index fund. The stated formula aggregates squared alpha-to-residual-risk ratios across securities and adjusts for investor risk…
The document points to Markov-switching models as a way to represent changing financial conditions, including market turbulence, inflation, and economic growth. It recommends a study that explains hidden Markov model estimation with the Baum–Welch algorithm…
The document explores whether CAPM remains valid when investor preferences follow Prospect Theory, with utility that is concave for gains and convex for losses. It contrasts this pattern with the concave utility and mean-variance assumptions often used to…
The document considers maximizing a portfolio’s Sharpe ratio when the portfolio must also satisfy a quadratic risk limit. A standard change of variables turns the ratio objective into minimizing portfolio variance subject to a linear return normalization.…
The document distinguishes two meanings of liquidity risk. One concerns whether assets can be sold or repoed quickly enough to meet cash obligations. The other is the price impact or discount that may arise when an investor must sell an illiquid bond, which…
The document asks how to calculate and compare portfolio performance when positions are opened and closed at different times. It presents a sequence of stock trades with staggered entry and exit dates to illustrate why simply adding each trade’s annualized…
The document contrasts portfolio calculations using simple returns with those using log returns. It gives the familiar weighted covariance formula for variance under linear returns and expresses portfolio log return as the logarithm of the weighted sum of…
The discussion considers how an intraday strategy trading S&P 500 stocks can screen new signals against its existing portfolio. The proposed starting point is to estimate each stock’s market beta and restrict trades when aggregate beta exposure crosses a…
The document distinguishes ensemble learning from pooling forecasts. Ensembles combine related estimates generated within a shared modeling process, while forecast pooling combines predictions that may come from different models. It also separates combining…
The document examines whether standard deviation remains a useful risk proxy when returns take only two values, such as zero or a positive payoff. Its central recommendation is to begin with the decision the measure is meant to support. If the practical…
The discussion examines how to infer cumulative prospect theory (CPT) parameters from an observed portfolio. The proposed method searches over value-function and probability-weighting parameters, repeatedly optimizing portfolio weights under constraints,…
The document outlines a way to test a cross-sectional momentum strategy on monthly bond data. At each rebalancing month, use each eligible bond’s return over the defined lookback period to rank the universe and assign bonds to ten portfolios, from past…
The document asks why portfolios selected using three risk or performance criteria—the Sharpe ratio, ulcer performance index, and serenity ratio—appear at the same point on separately constructed efficient frontiers. It states that the risk-free rate is zero…