Publications by systematicinvestor
Introduction to PloTA library in the Systematic Investor Toolbox
PloTA ( plot + ta ) library in the Systematic Investor Toolbox is a simple plot interface to charting Time Series and Technical Analysis plots. I created it as an alternative to charting functionality in quantmod package. It is designed to mimic default plot interface and works with xts objects. PloTA implements following methods: plota – main...
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Visualizing Tables with plot.table
plot.table function in the Systematic Investor Toolbox is a flexible table drawing routine. plot.table has a simple interface and takes following parameters: plot.matrix – matrix with data you want to plot smain – text to draw in (top, left) cell; default value is blank string highlight – Either TRUE/FALSE to indicate if you want to color ...
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Risk, Return and Analyst Ratings
Today I want to discuss a connection between Risk, Return and Analyst Ratings. Let’s start with defining our universe of stocks : 30 stocks from Dow Jones Industrial Average (^DJI) index. For each stock I will compute the number of Upgrades and Downgrades, Risk, and Return in 2010:2011. I will run a linear regression and compute correlation bet...
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Introduction to Asset Allocation
This is the first post in the series about Asset Allocation, Risk Measures, and Portfolio Construction. I will use simple and naive historical input assumptions for illustration purposes across all posts. In these series I plan to discuss: Maximum Loss, MAD, CVaR, CDaR, Omega Risk Measures 130:30 Long/Short portfolios and Cardinality Constraints...
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Maximum Loss and Mean-Absolute Deviation risk measures
During construction of typical efficient frontier, risk is usually measured by the standard deviation of the portfolio’s return. Maximum Loss and Mean-Absolute Deviation are alternative measures of risk that I will use to construct efficient frontier. I will use methods presented in Comparative Analysis of Linear Portfolio Rebalancing Strategie...
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130/30 Porfolio Construction
The 130/30 funds were getting lots of attention a few years ago. The 130/30 fund is a long/short portfolio that for each $100 dollars invested allocates $130 dollars to longs and $30 dollars to shorts. From portfolio construction perspective this simple idea is no so simple to implement. Let’s continue with our discussion from Introduction to A...
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Minimum Investment and Number of Assets Portfolio Cardinality Constraints
The Minimum Investment and Number of Assets Portfolio Cardinality Constraints are practical constraints that are not easily incorporated in the standard mean-variance optimization framework. To help us impose these real life constraints, I will introduce extra binary variables and will use mixed binary linear and quadratic programming solvers. Le...
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Expected shortfall (CVaR) and Conditional Drawdown at Risk (CDaR) risk measures
In the Maximum Loss and Mean-Absolute Deviation risk measures post I started the discussion about alternative risk measures we can use to construct efficient frontier. Another alternative risk measures I want to discuss are Expected shortfall (CVaR) and Conditional Drawdown at Risk (CDaR). I will use methods presented in Comparative Analysis of L...
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Controlling multiple risk measures during construction of efficient frontier
In the last few posts I introduced Maximum Loss, Mean-Absolute Deviation, and Expected shortfall (CVaR) and Conditional Drawdown at Risk (CDaR) risk measures. These risk measures can be formulated as linear constraints and thus can be combined with each other to control multiple risk measures during construction of efficient frontier. Let’s exa...
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The Most Diversified or The Least Correlated Efficient Frontier
The “Minimum Correlation Algorithm” is a term I stumbled at the CSS Analytics blog. This is an Interesting Risk Measure that in my interpretation means: minimizing Average Portfolio Correlation with each Asset Class for a given level of return. One might try to use Correlation instead of Covariance matrix in mean-variance optimization, but th...
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