Alpha Theory recently ran a Monte Carlo simulation comparing the Alpha Theory position sizing technique to a myriad of common position sizing methodologies including Kelly Criterion (Optimal F), Up / Down Ratio, Equal Weighting (and by proxy 14 Markowitz Mean-Variance Modern Portfolio Theory systems). Alpha Theory measured success by measuring the amount of Portfolio Expected Return added per 1% of portfolio exposure. Alpha Theory beat the closest methodology, Kelly Criterion, by 18%, Up / Down Ratio by 52%, Equal Weighting by 48%.
Continue reading "Probability-weighted return is the optimal method to construct a portfolio" »
It seems that every firm we speak to is struggling with the same set of problems right now. The manic nature of the market has caused a lot of funds to lose sight of their fundamental process. Firms are also struggling to improve their risk controls, raise and maintain capital, and are feeling the pressure to provide greater transparency. These are indeed unique and challenging times to be running a fund.
Alpha Theory has listened to the concerns from our clients and we’ve built in several ways to address these fundamental challenges. The New Year presents an opportunity to those firms that can adapt to changing circumstances and we are committed to helping our clients maximize their ability to respond to this climate. Here is how Alpha Theory can help you address these issues in 2009:
Continue reading "Is your portfolio ready for 2009? Getting back to fundamentals." »