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More great posts.
I am supposed to be working, and not talking, but don't worry there is always next weekend.
--- In amibroker@xxxxxxxxxxxxxxx, Howard B <howardbandy@xxx> wrote:
>
> Greetings all --
>
> There are several ways to create a portfolio from a group of individual
> tradable issues or systems.
>
> The Markowitz CAPM Mean-Variance model has traditionally been applied to a
> portfolio of individual equities, assuming that they will be bought and
> held. You could treat each trading system as an equity, compute its mean
> and variance, and plot it as a point on the M-V graph. Then apply CAPM
> methods to select the optimal portfolio -- select the issues that give the
> best return for the least variance, given the portfolio's objective.
>
> But if you are dealing with a number of trading systems, each of which has
> already has an equity curve created by the active trading of one or more
> issues, you might prefer to align the daily equity of the individual systems
> by date, then search for the weightings that give the best, according to
> your objective function, portfolio return. Of course, you could apply the
> same technique to the daily closing prices of the equities.
>
> In the first example -- the CAPM model -- you will never choose a system
> that has a negative return as a component of the portfolio. In the second
> example, you might.
>
> Thanks,
> Howard
>
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