To simulate a realistic decision-making process we apply a backtesting methodology. Sample means and risk measures are estimated for the subperiod January 1987 to September 1998. In those cases where the return series is adjusted for autocorrelation the estimation of the desmoothing parameters is also based on the shortened sample period. Then the portfolios are [...]
So far three methodologies for a quantitatively driven process of portfolio construction have been examined. The results of the empirical study show that the way of accounting for skewness, kurtosis and autocorrelation in return series has significant impact on portfolio weights. Measured by riskadjusted performance numbers as well as stochastic dominance criteria, the identified differences [...]
The VIX Index reflects the equity and options markets’ expectation of earnings volatility. Companies with deteriorating credit statistics are more likely to experience high equity price volatility than companies with a stable credit trend. As financial profiles of companies improve and the uncertainty about their future earnings declines the hedging costs to invest in those [...]
Simply recognising the need to manage risk is not enough. The ethos of an organisation should recognise and reward behaviour that manages risk. This requires a commitment by senior managers and the resources (including training) to match. Too often, control systems are seen only as an additional overhead and not as something that can add [...]
Experience shows that risk must be actively managed and accorded a high priority, not only within the decision-making process but permanently and throughout the organisation. This might mean that risk-management procedures and techniques are well documented, clearly communicated and regularly reviewed and monitored. In order to manage risks, you have to know what they are, [...]
It is harder to assess the risks inherent in a business decision than to identify them. Risks that lead to frequent losses, such as an increasing incidence of employee-related problems or difficulties with suppliers, can often be overcome using past experience. Unusual or infrequent losses are harder to quantify. Risks with little likelihood of occurring [...]
My name is Emily Mortimer. I'm an academy professor with a degree in economy and considerable experience in training both students and private contractors in matters of business, finances and money management.