QWAFAFEW Meeting: 21 July 2020
BETTER PORTFOLIOS WITH HIGHER MOMENTS
A QWAFAFEW discussion led by:
Maximizing expected log leveraged return is a direct expected utility approach complementary to Markowitz’s mean-variance portfolio construction. An implementation of Rubinstein’s generalized log utility, it is growth-optimal for surplus over financial obligations. Its added value is in guidance on appropriate risk aversion, matching products with suitable investors, and in shielding against tail risk. Option positions are first class citizens within its comprehension. Here it is used to explain Black-Scholes implied volatility anomalies. Additionally, the recommended toolset includes modeling the security return joint probability distribution by a matrix of observed and hypothetical returns, rather than by intermediate statistics, enabling flexibility across probability distributions and their enhancement with various techniques. Optimization code is simple and practical.
Jarrod Wilcox is President of Wealthmate, Inc. After a career in teaching, management consulting, institutional investing, and high net worth investment advice, he is now developing software to make financial decision-making more productive. His books include Investing by the Numbers, and as coauthor, Financial Advice and Investment Decisions, A Manifesto for Change. Jarrod is also known for gambler’s ruin bankruptcy prediction, the PB-ROE stock valuation model, and the discretionary wealth approach for linking financial planning to investing.
Time: 7:00 PM sharpe
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Donna Cool Murphy
The members of the Steerage Committee are responsible for coordinating the program content.
Program suggestions from members are always welcome.