Category: Risk AnalysisThe analysis published under this category are as follows.
Tuesday, December 02, 2014
Anthony Garner writes:
Using a simple system it is said to be possible to achieve a better risk adjusted return than would be achieved by buy and hold. Maximum drawdown may be less severe and standard deviation may be lower.
Much is made by the retail investment community (and indeed others who should know better) of the advantages of algorithmic market timing based on limited testing over limited timeframes and over an even more limited number of instruments.
Saturday, September 13, 2014
In a recent memo to Oaktree Capital clients, Chairman Howard Marks writes about "the time I spent advising a sovereign wealth fund about how to organize for the next thirty years. My presentation was built significantly around my conviction that risk can't be quantified a priori. Another of their advisors, a professor from a business school north of New York, insisted it can. This is something I prefer not to debate, especially with people who're sure they have the answer but haven't bet much money on it."Read full article... Read full article...
Tuesday, September 24, 2013
Joe Budden writes: Following the financial crisis of 2007-2008, many veteran traders were faced with a totally different financial landscape in which to operate. The ‘New Normal’, a term first coined by Pimco trader, Mohammed El-Erian, became the finance community’s go-to word for a new world order which bore more similarities with the post Depression era than anything investors had previously experienced.Read full article... Read full article...
Saturday, November 03, 2012
Diversification of your investments is the only real free lunch, or so we are told. But how do we go about deciding what to diversify into? In this week’s short Outside the Box, my friend Jason Hsu of Research Affiliates argues that the real basis for diversification should be risk. And given that risk seems to be rising everywhere we look, thinking about how to deal with risk in our portfolios makes a great deal of sense.
I’m also including in today’s OTB a complementary piece by good friend Charles Gave of GaveKal. This is a short piece that is long on common sense and that winds up with a straightforward list of places where we can invest to minimize risk.Read full article... Read full article...
Tuesday, October 23, 2012
How to build an Optimal Investment Portfolio with Markowatz's Portfolio Theory? / InvestorEducation / Risk Analysis
There have been many changes in today’s stock market trading landscape which is dominated by computers and ECN networks as compared to the ‘open outcry’ system that existed until the early 1980s. During those days markets are relatively inefficient in a way that price change does not reflect the change in the news and events. Those who can get hold of technologies will have the upper hand in trading the markets because they will receive the news much sooner than the rest of us. Those who possess telex, fax and computers will certainly have an advantage not only in receiving the news but also in executing the buy and sell orders.Read full article... Read full article...
Monday, April 23, 2012
As someone who plays poker regularly, I'd like to think that I have a good understanding of why luck is important in our lives. It's NOT because the world is completely random and we have no influence over what outcomes will materialize for us - actually, it is the very fact that we do make meaningful decisions in the face of uncertainty that generates luck. Let me try to explain what I mean with an analogy to the game of poker.
Poker is a game of skill, which means those players with superior skills (patience, discipline, memory, critical/logical thinking, mathematical analysis) have a long-term edge over the less skillful among them. It is a very simple game with simple rules governing what each player can do (fold, call, bet, raise), what order they can do it in, how much they can bet at any given time, which hands rank higher than others, etc.Read full article... Read full article...
Wednesday, December 22, 2010
Investor Parachutes vs. Pillows: Why Diversification Doesn't Work / InvestorEducation / Risk Analysis
Prechter and Kendall's "All the Same Market" Analysis Shows how Diversification Can't Protect You from Correlated Risk
A dear friend of mine wants to celebrate an important health milestone by going skydiving with friends. She feels happy and healthy and excited. She wants to do something very thrilling to celebrate.Read full article... Read full article...
Sunday, October 31, 2010
Just about every stockbroker, financial advisor or money manager worth their weight in salt knows that diversification is a major way to us to manage investment risk.
But here's what most -- professionals and retail investors alike fail to remember: Diversification doesn't just mean choosing to invest in different companies that do different things and that's it. Creating real diversity and ultimately protecting your investment portfolio involves a little more work, which amazingly, most professionals still get wrong.Read full article... Read full article...
Monday, October 18, 2010
Alexander Green writes: We’re making money hand over fist – locking in significant double- and triple-digit gains – in our Oxford Trading Portfolio, Seven Deadly Sins Portfolio, Oxford All-Star Portfolio, Momentum Portfolio, Insider Portfolio and our New Frontier Portfolio.Read full article... Read full article...
Wednesday, September 22, 2010
Shah Gilani writes: You may be facing immense foreign-currency risks in your investment portfolio - and not even realize it. If that's the case, don't feel bad: You're not alone.
The reality is that most American investors have no idea that currency exchange rates directly affect U.S. corporate earnings, this country's stock market, or the growth rate of our economy.Read full article... Read full article...
Saturday, September 18, 2010
Diversification is the one of the ways to reduce risk, or so we learned. While a properly diversified portfolio might reduce your risk of loss, it also lowers the chance you have to achieve market-beating returns.
If you are a value investor, you find that your approach already reduces your risk of loss without having to resort to various diversification schemes.Read full article... Read full article...
Sunday, August 01, 2010
I normally talk only about currencies in my Money and Markets columns. But today I want to make an exception and address some commonly held misconceptions many investors have about their investments.
For the typical individual investor it’s easy to get caught up in the 24-hour a day media hype of the stock market. So it’s no surprise that many live and die with the direction of the market. They’ve bought hook-line-and-sinker into the notion that blindly plowing money into stocks is the only way to grow their wealth.Read full article... Read full article...
Friday, July 30, 2010
Most investors incorrectly think of "risk" as the possibility that the market value of a financial asset might fall below the amount that he or she has invested in the asset. OMG, how could this be happening!
Think about it. The harboring of these misconceptions (that lower market price = loss or bad and/or that higher market price = profit or good) is the greatest risk creator of all. It invariably causes inappropriate actions within the large mass of individuals who are uninitiated in the ways of the investment gods.Read full article... Read full article...
Tuesday, January 26, 2010
Stock Market Investors 2010 Risk Reward Focus, Calm Seas, Blood in the Water / Stock-Markets / Risk Analysis
The picture below is a little cheesy but I think it depicts the way many investors feel right now as they sit isolated, feeling trapped and abandoned. They may have listened to the fear mongers and pulled their pensions or are thinking about it, maybe they fired their advisor and are cuddled up with their cash wondering what to do next.Read full article... Read full article...
Thursday, December 03, 2009
Imagine this ... John is hiking up a 5 mile mountain. After each mile hiked, he notices that he is tiring and that he needs more time to rest.
He just finished his third mile, and he is starting the next mile with less energy ... but he still has energy left. The reality is that with each additional mile hiked, his energy is lessening.Read full article... Read full article...
Sunday, August 09, 2009
Aussie Dollar Signaling Financial Markets Risk Appetite Is Vulnerable to Reversal / Stock-Markets / Risk Analysis
Bryan Rich writes: According to the financial markets, the world has become a very calm and comfortable place again. But has it?
Just a year ago markets were crashing all around us …Read full article... Read full article...
Friday, October 31, 2008
Whether we are coaching you as you manage your assets, or whether we are managing assets for you, if your investment account is mature, we follow this general approach — appropriately tweaked to your specific process preferences and needs.
A mature account is one for which expected new money additions are minimal compared to the size of the accumulated assets — where replacement of lost assets is not a practical or feasible option.Read full article... Read full article...
Sunday, July 27, 2008
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Thursday, January 24, 2008
Investors Lose Relying On Worthless Rating Agencies - Moody's, Fitch and Standard & Poor's / Stock-Markets / Risk Analysis
"The one sure way to prolong a depression is to resist it..." – Walter Lippmann, Sept. 1931
ISN'T MODERN LIFE MARVELLOUS? All risk has vanished, not least for high-risk behavior.
Hence Scott Anthony Gomez Jr., now suing the sheriff of Pueblo County in Colorado . Gomez was able to break out of his jail cell, push up a ceiling tile, and crawl to freedom through the ventilation shafts before slipping and falling 85 feet off the roof of his prison.Read full article... Read full article...
Saturday, December 08, 2007
In this issue:
- Ubiquity, Complexity Theory and Sandpiles
- Fingers of Instability
- A Stable Disequilibrium
- General Equilibrium with Endogenous Uncertainty
- Identity Theft and New York
How does the risk of default in California or Thailand get spread throughout the world, causing problem in money market funds in Europe and Florida? Yes, we can trace the linkages now, but was it possible to predict the crisis beforehand? And can we use what we learn to predict and hopefully hedge ourselves from the next crisis? Why do these things seem to be happening with more frequency? This week we are going to look at some economic theories which will give us some insight into the above questions. As it turns out, the more that individuals hedge their risk in economic markets - the larger the network - the more the entire system is put at risk. There is a lot of ground to cover, so we will jump right in.Read full article... Read full article...