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Wednesday, June 21, 2006

Can Managed Alpha Returns be Replicated?

The dependency between two random variables is perfectly characterized by their joint distribution. One can nonetheless study the marginal distributions separately from the dependency structure by means of a statistical tool: copulas. This copula function contains the whole information about the variables' dependency structure.

Here's a thought; given the nature of copulas, could managed alpha be replicated by asset catagory? - picture a model that replicates, say...managed commodity returns.


Posted by Trade Monkey :: 9:30 PM :: 1 comments


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