Highlights of the blog over the past year.
Most popular posts
The posts with the most hits during the year.
- A practical introduction to garch modeling (posted in 2012)
- A tale of two returns (posted in 2010)
- The top 7 portfolio optimization problems (posted in 2012)
- The number 1 novice quant mistake (posted in 2011)
- On smart beta
- The distribution of financial returns made simple (posted in 2012)
- The mystery of volatility estimates from daily versus monthly returns (posted in 2011)
- A comparison of some heuristic optimization methods (posted in 2012)
- Quant finance blogs
- Predicted correlations and portfolio optimization
- The basics of Value at Risk and Expected Shortfall (posted in 2012)
- The look of verifying data
- What the hell is a variance matrix? (posted in 2010)
- The estimation of Value at Risk and Expected Shortfall (posted in 2012)
- The components garch model in the rugarch package
- The low volatility anomaly and CAPM
- Simple tests of predicted returns
- An easy mistake with returns (posted in 2012)
- Implied alpha and minimum variance
Most under-valued posts
Governance Reimagined — the book, not necessarily the review — has had too little attention.
Social impact bonds are interesting and important (or at least should be).
Book reviews
Table 1 summarizes (and has links to) the reviews of books during the year.
Table 1: Recommendations of reviewed books.
| title | author | recommended |
| Thinking, Fast and Slow | Daniel Kahneman | highly |
| Governance Reimagined | David Koenig | highly |
Fund management
- On smart beta
- Alternative equity indices and random portfolios
- An interview regarding social impact bonds
Performance
Quant finance
The quantitative finance posts can be put into a few categories.
Quant fundamentals
Prediction
Trade selection
- Implied alpha and minimum variance
- Predicted correlations and portfolio optimization
- Four moments of portfolios
- Further adventures with higher moments
Distribution of returns
Variability
- Variability of garch predictions
- Variance matrix differences
- Variability of predicted portfolio volatility
Other
- Clustering and sector strength
- Stock-picking opportunity and the ratio of variabilities
- The low volatility anomaly and CAPM
- Slouching towards simulating investment skill
- A pictorial history of US large cap correlation
- Quant finance blogs
R
Quite a large fraction of the posts involve R and many of those provide explanations of R behavior.
However, there was one post that was explicitly about R: The components garch model in the rugarch package.
Risk
The posts on risk again focused on Value at Risk and Expected Shortfall. The posts were mainly about why one might be preferred to the other:
- An infelicity with Value at Risk
- The scaling of Expected Shortfall
- Changeability of Value at Risk estimators
- Value at Risk with exponential smoothing
- Historical Value at Risk versus historical Expected Shortfall
Statistics
Soundtrack
Folklore
Add a touch of mystique where the writing gets weak
Break up coherence with a cut-cut-cut up technique
from “Folklore” by James
Stopping by Woods on a Snowy Evening
Whose woods these are I think I know
from “Stopping by Woods on a Snowy Evening” by Robert Frost
Maybellene
Oh Maybellene, why can’t you be true?
from “Maybellene” by Chuck Berry
Night Train
A temporary refuge where somebody else can stand
from “Night Train” by Bruce Cockburn
Throw Back the Little Ones
Throw back the little ones
And pan-fry the big ones
Use tact, poise and reason
And gently squeeze them
from “Throw Back the Little Ones” by Donald Fagen and Walter Becker
The Second Coming
Surely some revelation is at hand
from “The Second Coming” by W. B. Yeats
Mercy of the Fallen
Oh my fair North Star
I have held to you dearly
I have asked you to steer me
from “Mercy of the Fallen” by Dar Williams
Different Sides
Both of us say there are laws to obey
But frankly I don’t like your tone
from “Different Sides” by Leonard Cohen
Did You Ever Have to Make Up your Mind?
Did you ever have to finally decide?
And say yes to one and let the other one ride
from “Did you ever have to make up your mind?” by John Sebastian
Long Way Home
Well I stumbled in the darkness
I’m lost and alone
Though I said I’d go before us
And show the way back home
from “Long Way Home” by Tom Waits and Kathleen Brennan
Missed the Boat
Our ideas held no water
But we used them like a dam
Oh, and we carried it all so well
from “Missed the Boat” by Isaac Brock
The Stable Song
were we the belly of the beast or the sword that fell…we’ll never tell.
from “The Stable Song” by Gregory Alan Isakov
Long Ride
‘ Cause the dawn and the dying light
Have gathered too much meaning
from “Long Ride” by Taasha Coates and Tristan Goodall
Comes Love
Comes a rainstorm, put your rubbers on your feet
Comes a snowstorm, you can get a little heat
from “Comes Love” by Lew Brown, Sam Stept and Charles Tobias
Imitosis
And why do some show no mercy while others are painfully shy?
Tell me doctor, can you quantify?
He just wants to know the reason why
The reason why
from “Imitosis” by Andrew Bird
Hey Jack Kerouac
Hey Jack, now for the tricky part
When you were the brightest star
Who were the shadows?
from “Hey Jack Kerouac” by Natalie Merchant and Robert Buck
Every Breath You Take
Every vow you break
Every smile you fake
Every claim you stake
I’ll be watching you
from “Every Breath You Take” by Sting
It Isn’t Gonna Be That Way
This minute would crack
And I could go through
And walk out in time
Where no one has been
from “It Isn’t Gonna Be That Way” by Steve Forbert
Lighthouse
He’ll light your way but that is all
Steer your own ship back to shore
from “Lighthouse” by Kolwalczyk, Taylor, Dahlheimer and Gracey
Further In
and they like some wild river flow as we go further in
from “Further In” by Greg Brown
Thank you
I’d like to thank those who have read the blog over the past year (and beyond). Special thanks go to those who
- subscribe to the RSS feed
- subscribe via email
- follow us on twitter
- have made comments
All the best in the coming year.
