[R-sig-finance] Random Numbers

con.keating@financedevelopmentcentre.com con.keating at financedevelopmentcentre.com
Sat Nov 19 10:37:10 CET 2005

Hi Lorenzo

You should look at Campbell Harvey's (Duke University) website for a 
critique of
Michaud's resampled frontier - he makes the point rather well that it is not /
cannot be optimal.


Quoting "L.Isella" <L.Isella at myrealbox.com>:

> On 11/18/05, Patrick Burns <patrick at burns-stat.com> wrote:
>> I think there are several problems with the resampled
>> efficient frontier, here is one: The procedure as I understand
>> it is to bootstrap the mean of the historical returns.  What
>> should be bootstrapped is the alpha generation process.
>> One hopes that there are few fund managers who use the
>> historical mean as their expected return.  Bootstrapping the
>> actual alpha generation process is likely to be non-trivial.
>> Patrick Burns
>> patrick at burns-stat.com
>> +44 (0)20 8525 0696
>> http://www.burns-stat.com
>> (home of S Poetry and "A Guide for the Unwilling S User")
> Hi,
> Well, the way I understood the efficient resample thing is above all 
> a cure for the instability of Markowitz optimization leading to 
> non-diversified ptfs.
> The problem of the correlations and expected rtns is quite a separate 
> matter, but whatever solution  I "invent" for these problems, then I 
> can Monte Carlo simulate the series of returns accordingly.
> Lorenzo
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