Studying existing portfolio management schemes and researching and developing new ones, using robust and fully-disclosed methods of quantitative analysis— on behalf of professional money managers and investment advisors who are disposed toward asset allocations that are optimal yet responsive to shifting market conditions… who either want their own systems tuned and qualified and made more reliable or want new ones created for them.

The Outlook

Financial analyses are all about history mattering. We can even take it for granted that the nihilistic “efficient market” hypothesis arose due to its authors being unable to find answers… in what? In the course of their studies of historical data, that's what. Of course we can learn from what the marketplace has done in the past. And the data under study need not be limited to past performance but could include security-specific fundamentals or factors that influence the market as a whole. I am currently coding primarily with Python and NumPy.

Meeting Challenges

During the last two steep stock market declines of 2000–03 and 2007–09 diversification didn't help; getting into cash did. Can that be done in real time? Two recent working papers of mine— one accessible here now and the other soon available— report on my early research on momentum, which met with limited success but did include a way of effectively avoiding debacles, and on a quite recent development that is utterly definitive with respect to quelling market risk without loss of return.

Insider's Alpha

In 1968 Michael Cole Jensen invented “alpha”, the famous measure of portfolio performance. The “insider's alpha” is an extension of Jensen's concept that is applicable not only or particularly to portfolios whose exposure to systematic market risk is rather constant but also to portfolios that are on occasion heavily in cash. The disclosure of its invention by me is to be found in pp. 43–48 of this working paper.

Details of the New Method

It is principally based on the use of a repurposed “shrinkage estimator”, where the repurposing has to do with how the procedure is caused not only to shrink the uncertainty in the outcome but also to improve its mean value. Provided only that the risk-on securities to be held are ETFs or mutual funds the returns are improved with and without risk adjustment. Visit the Traded Portfolio for interactive charts and from there you will soon be able to download the working paper— it's all that you need to know— and the core of the project's code base as source code (free of charge)!