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  • Stress Testing Your Portfolio [View article]
    I am not accounting for the increase in autocorrelation / cross correlation that occurs in a major meltdown but I am hoping that the 3SD worst estimate is still a good measure. Basically, we are saying that we plan for a really bad (<1/1000) event while ignoring autocorrelation/correl... increases and this is used as a reasonable estimate of the worst case that investors must plan for, given that we know that this will under-estimate the probability of such an event. In light of 2008-2009, this look very reasonable. My estimated worst case 1-year using this simplified approach was worse than 2009-2009 for all the portfolios I have examined.


    On Jun 16 05:18 PM gasem wrote:

    > In terms of stress testing how do you view changes in a portfolios
    > diversification metric and auto-correlation metric
    >
    > As I watch things evolve I saw diversity nose dive and auto correlation
    > explode
    Jun 16 23:25 pm |Rating: 0 0
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