Markowitz analysis of today vs 2008

(Last Updated On: January 17, 2016)

Markowitz analysis of today vs 2008

From the NYC Contact:

Going over this again something really bothers me. 1) ‘ Dr. Markowitz is certain 2008 was not an outlier event. “… It’s a one-in-40 event. It wasn’t the worst year of return.” ‘ >> Yes because of unprecedented government intervention. Without that it could have easily been a 4 or 5 standard deviation move. 2) ‘ The basic notion that you should worry about risk and return on the portfolio as a whole, and this involves forward looking estimates of means, variances and co-variances, that has not changed. ‘ >> Very simplistic. How good are your estimates? Don’t you need to add the empirical probability of your estimate being correct? what about accounting for market regime change? I guess the above statement assumes that you have done all this.



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