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  #51  
Old 02-26-2018, 01:19 AM
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Typo. Meant highest.
I think the driver here is that the means seem to be wider spread than the SD or even the cte.. I even tried using variance but also didn't get much else. I think I have to go with some arbitrary minimum of bond or treasuries or max equity first. I'll see about finding a statistic to justify it.
or tie it to the goals of the cdef in some way.
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  #52  
Old 02-26-2018, 09:46 AM
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All risk/return metrics that I personally tried perform the best with 100 equities. Then it should be approached as follows (IMO):

Portfolio theory says that you can maximize returns for a certain level of risk taken (you will use the metric for this)

Now what level of risk you think is adequate for the CDEF? 100% equities? Probably not. 100% equities may generate big returns in the long term but can have large short-term losses and the CDEF cannot afford that.

Therefore you should set a requirement for how much equities you want the CDEF to take under each market scanario then use the metric to to determine the best one given that restriction.

This is how I approached it at least

Last edited by Sir Issac; 02-26-2018 at 09:53 AM..
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  #53  
Old 02-26-2018, 09:48 AM
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All risk/return metrics that I personally tried perform the best with 100 equities. The you it should be approached is as follows (IMO):

Portfolio theory says that you can maximize returns for a certain level of risk taken (you will use the metric for this)

Now what level of risk you think is adequate for the CDEF? 100% equities? Probably not. 100% equities may generate big returns in the long term but can have big large term losses and the CDEF cannot afford that.

Therefore you should set a requirement for how much equities you want the CDEF to take under each market scanario then use the metric to to determine the best one given that restriction.

This is how I approached it at least
Thanks. Glad to see you got similar results to me and used a similar approach that I am considering.
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  #54  
Old 02-26-2018, 11:33 AM
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Am i crazy to be running 200+ scenarios? basically every combination of assets in 5% increments so that i can see what maximizes my risk/return metric?
I did that exact same thing, and for me it turned out to be really helpful.
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  #55  
Old 02-26-2018, 11:38 AM
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ii used sharpe ratio for choosing the optimal mix
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  #56  
Old 02-26-2018, 12:43 PM
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Sir Isaac, I am nominating you for sainthood.
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  #57  
Old 02-26-2018, 01:12 PM
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I did that exact same thing, and for me it turned out to be really helpful.
Did you upload the spreadsheet with the 200 plus scenarios?
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  #58  
Old 02-26-2018, 01:37 PM
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Sir Isaac, I am nominating you for sainthood.


i'm surprised that nobody made a thread like this before. either everyone was confused or people got selfish when they figured it out, or a little of both.

I don't think your task 2 needs to be perfect to pass though.
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  #59  
Old 02-26-2018, 04:08 PM
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Did you upload the spreadsheet with the 200 plus scenarios?
Yes, the spreadsheet I uploaded included everything.
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  #60  
Old 02-27-2018, 10:15 AM
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If you used the Sharpe Ratio, what other metrics did you set requirements on? Also, did you sensitivity test the Sharpe Ratio? Updating the risk free value each time (i.e. if you are senstivity testing inflation, the risk free value is at the same inflation). If so, my interpretation would follow along the lines of:

Increase: "better reward to risk ratio under these market conditions"
Decrease: ^ opposite
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