2015

Tactical Alpha in Theory and Practice (Part II): Principal Component Analysis

In Part I of this series, we explored Grinold’s Fundamental Law of Active Management, and why the theory leads to misguided conclusions in the presence of asset correlations. In this article we will offer a primer on a useful tool for portfolio evaluation, Principal Component Analysis (PCA), and illustrate how PCA can help quantify the number of independent bets in a portfolio of correlated assets.

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Experts Aren’t Helpful, and Other Useful Lessons From “DIY Financial Advisor”

We draw a significant amount of inspiration for the material we cover on this blog from the publications of our financial brethren. Unfortunately, given the non-stop firehouse of information that increasingly characterizes the digital age, it’s nearly impossible to consume anything longer than a blog post. So it’s noteworthy that we were inspired to read – cover to cover – Wes Gray, Jack Vogel and David Foulke’s most recent book, DIY Financial Advisor.

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All Strategies Blow Up

We are a quantitative finance shop, right down to the ground. All of our portfolios are driven by supervised quantitative models with no discretionary intervention. As such, I was inspired to respond to a recent article on the risk of quant strategies, as I think the way our team approaches quantitative research diverges from how many outsiders perceive quant, and also from how many quantitative shops work.

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About Us

ReSolve Asset Management Blog is an investment research forum, opinion pieces, and educational material from the team at ReSolve Asset Management. Our views are driven by evidence based finance, with a special focus on asset allocation, factors and smart beta, retirement and endowment strategies, and quantitative methods.

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