Introduction[ edit ] Microsimulation can be distinguished from other types of computer modeling in looking at the interaction of individual units such as people or vehicles. Each unit is treated as an autonomous entity and the interaction of the units is allowed vary depending on stochastic randomized parameters. These parameters are intended to represent individual preferences and tendencies.
QPfit calculate and display effective style weights using quadratic programming These functions calculate style weights using an asset class style model as described in detail in Sharpe The following functions calculate effective style weights and display the results in a bar chart.
There is a significant amount of academic literature on identifying and attributing sources of risk or returns.
These are well covered in chapters on factor analysis in Zivot and Wang and also in the R functions factanal for basic factor analysis and princomp for Principal Component Analysis. The authors feel that financial engineers Econometric analysis analysts would benefit from some wrapping of this functionality focused on finance, but the capabilities already available from the base functions are quite powerful.
Risk Analysis Many methods have been proposed to measure, monitor, and control the risks of a diversified portfolio.
Perhaps a few definitions are in order on how different risks are generally classified. Market Econometric analysis is the risk to the portfolio from a decline in the market price of instruments in the portfolio.
Liquidity Risk is the risk that the holder of an instrument will find that a position is illiquid, and will incur extra costs in unwinding the position resulting in a less favorable price for the instrument. In extreme cases of liquidity risk, the seller may be unable to find a buyer for the instrument at all, making the value unknowable or zero.
Credit Risk encompasses Default Risk, or the risk that promised payments on a loan or bond will not be made, or that a convertible instrument will not be converted in a timely manner or at all.
There are also Counterparty Risks over the counter markets, such as those for complex derivatives. Tools have evolved to measure all these different components of risk.
Processes must be put into place inside a firm to monitor the changing risks in a portfolio, and to control the magnitude of risks. For an extensive treatment of these topics, see Litterman, Gumerlock, et. The simplest risk measure in common use is volatility, usually modeled quantitatively with a univariate standard deviation on a portfolio.
Volatility or Standard Deviation is an appropriate risk measure when the distribution of returns is normal or resembles a random walk, and may be annualized using sd. Many assets, including hedge funds, commodities, options, and even most common stocks over a sufficiently long period, do not follow a normal distribution.
Markowitz, in his Nobel acceptance speech and in several papers, proposed that SemiVariance would be a better measure of risk than variance.
See Zin, Markowitz, Zhao http: This measure is also called SemiDeviation. The more general case of downside deviation is implemented in the function DownsideDeviationas proposed by Sortino and Pricewhere the minimum acceptable return MAR is a parameter to the function.
It is interesting to note that variance and mean return can produce a smoothly elliptical efficient frontier for portfolio optimization utilizing solve.
Use of semivariance or many other risk measures will not necessarily create a smooth ellipse, causing significant additional difficulties for the portfolio manager trying to build an optimal portfolio. Another very widely used downside risk measures is analysis of drawdowns, or loss from peak value achieved.RealStat, Inc.
is a full service commercial and industrial appraisal and consulting firm dedicated to applying state of the art solutions to the valuation of real estate. We propose several econometric measures of connectedness based on principal-components analysis and Granger-causality networks, and apply them to the monthly returns of hedge funds, banks, broker/dealers, and insurance companies.
International Data Sources. Statistics for Economics A vast collection of online data resources, sorted according to statistical source/agency. Links up to just about every major site on the Internet providing statistical information. RealStat, Inc.
is a full service commercial and industrial appraisal and consulting firm dedicated to applying state of the art solutions to the valuation of real estate.
What is EViews? EViews offers academic researchers, corporations, government agencies, and students access to powerful statistical, forecasting, and modeling tools through an innovative, easy-to-use object-oriented interface. THE ALLOCATION OF TALENT 1 1.
Introduction Over the last 50 years, there has been a remarkable convergence in the occupational distribution between white men, women, and blacks.