Quant Mashup - Anton Vorobets Academic Anti-Science [Anton Vorobets]This is a longer edition of the Portfolio Construction newsletter, presenting the many ways that I have witnessed anti-scientific tendencies in finance and economics academia. If you are fully aware of these, and just want to skip to the popular posts recap, this is available at the bottom of the(...) Quantamental Catch-Up [Anton Vorobets]Many of you have undoubtedly enjoyed the summer holidays, so you might have missed out on the first five lectures of the Applied Quantitative Investment Management course. So far, we have been through the first four chapters of the Portfolio Construction and Risk Management book, reaching a point(...) Learn from the Source [Anton Vorobets]This newsletter gives you the last opportunity to get access to the Applied Quantitative Investment Management course at the best price. I will share the first lecture on Thursday, July 3rd. After that, the subscription price will increase from the current €100 per year. The subscription will give(...) Resampled Portfolio Stacking [Anton Vorobets]This post gives a high-level introduction to Resampled Portfolio Stacking, which is a method for portfolio optimization with fully general parameter uncertainty introduced in Chapter 6 of the Portfolio Construction and Risk Management book1. The fundamental perspectives for the Resampled Portfolio(...) Variance for Intuition, CVaR for Optimization [Anton Vorobets]While everyone understand that investment risk is characterized by large losses or drawdowns, mainstream finance and economics academics still continue to promote mean-variance analysis. Even Harry Markowitz understood that risk should be measured by the downside, but in 1950’s the computational(...) Sequential Entropy Pooling [Anton Vorobets]Entropy Pooling is a core method of the next generation investment framework, thoroughly presented in the Portfolio Construction and Risk Management book1. As a very oversimplified introduction to Entropy Pooling, you can think about it as a generalization of the Black-Litterman model without all(...) Time- and State-Dependent Resampling [Anton Vorobets]Generating realistic future paths for investment market time series is crucial for risk management, good backtesting1, fully general stress-testing2, and CVaR tail risk optimization, see the Portfolio Construction and Risk Management book3. The recent Time- and State-Dependent Resampling article4(...) Better Backtesting [Anton Vorobets]I recently wrote a post about naive backtesting of investment risk measures1, which is usually performed in the following way: Look at some historical data samples. Optimize portfolios using different risk measures. Crown the investment risk measure with the highest cumulative performance as “the(...) The Book is Out [Anton Vorobets]The PDF version of the Portfolio Construction and Risk Management book is now publicly available. You can find links to the book and its accompanying Python code at the bottom of this newsletter. It contains many new perspectives and results that are exclusive to the book, showing you that there are(...) Portfolio Construction and Risk Management Book [Anton Vorobets]The PDF version of the Portfolio Construction and Risk Management book is freely available online at the bottom of this post. The accompanying code to the book is available on GitHub at https://github.com/fortitudo-tech/pcrm-book1. The book has been written through a crowdfunding campaign that you(...) The Finance and Economics Problem [Anton Vorobets]Getting fundamental assumptions right is essential for successful investment and risk management. The aspects that enable us to build portfolios intelligently and outperform the market are subtle nuances that are not easily accessible to most investors. If you do not believe me, check out this video(...) Naive Backtesting [Anton Vorobets]I am occasionally asked about historical backtests “proving” that CVaR is a better risk measure than variance. I provide such a backtest in Section 2.6 of the Portfolio Construction and Risk Management book1 and explain why it is naive (see the PDF at the bottom of this article). Thanks for(...) Tactical Asset Allocation Performance Lower Bound [Anton Vorobets]Asset allocation is commonly split into strategic asset allocation (SAA) and tactical asset allocation (TAA). Strategic usually refers to investment horizons above one year, while tactical usually refers to investments horizons below one year. Almost all institutional investors are required to have(...)