Purpose – The purpose of this paper is to describe a generalization of the familiar two‐sample t ‐test for equality of means to the case where the sample values are to be given unequal weights. This is a natural situation in financial risk modeling when some samples are considered more...

Purpose – The purpose of this paper is to describe a generalization of the familiar two-sample t-test for equality of means to the case where the sample values are to be given unequal weights. This is a natural situation in financial risk modeling when some samples are considered more reliable...

Risk-only investment strategies have been growing in popularity as traditional investment strategies have fallen short of return targets over the last decade. However, risk-based investors should be aware of four things. First, theoretical considerations and empirical studies show that...

The authors extended the standard paradigm for portfolio stress testing in two ways. First, they introduced a toolkit that enables investors to envision and administer extreme scenarios. The risk model is integral to the stress test. They demonstrated the substantial impact of using historical...

We gauge the return-generating potential of four investment strategies: value weighted, 60/40 fixed mix, unlevered and levered risk parity. We have three main findings. First, even over periods lasting decades, the start and end dates of a backtest can have a material effect on results; second,...

In this article, we extend the standard paradigm for portfolio stress testing in two ways. First, we introduce a structured set of tools that enable investors to envision and administer extreme scenarios. We show how to take account of historical and hypothetical covariance matrices in scenario...