Method for estimating inputs to an optimization of a portfolio of assets
OwnerCraig W. Frenchinventor
Life of this patent
Estimating the term…
Abstract
Methods for estimating expected risk and expected returns associated with a portfolio of assets are disclosed along with methods for optimizing a portfolio of assets. In one embodiment, subjective opinion of at least one analyst is incorporated into the estimation process. In another embodiment, subjective opinion of at least one analyst is incorporated into the optimization process. In a further embodiment, models are not utilized in order to avoid the introduction of structural biases into the estimation and optimization processes.
Claims34
A method for estimating expected risk associated with a portfolio of assets, wherein expected risk is expressed as a matrix of variances and covariances of expected portfolio returns, comprising:
- deriving a sample matrix of variances and covariances based on sample data relating to realized historical performance of assets in a portfolio;
- deriving a subjective matrix of variances and covariances based on subjective opinion of at least one analyst relating to expected future performance of at least one asset in the portfolio;
- and
- deriving an estimated matrix of variances and covariances for the portfolio based on the sample and subjective matrices.
A method for estimating expected returns associated with a portfolio of assets, wherein expected returns is expressed as a column vector of returns, comprising:
- deriving a sample column vector of returns based directly on sample data relating to realized historical performance of assets in a portfolio;
- deriving a subjective column vector of returns based on subjective opinion of at least one analyst relating to expected future performance of at least one asset in the portfolio;
- and
- deriving an estimated column vector of returns for the portfolio based on the sample and subjective column vectors.
A method for optimizing a portfolio of assets comprising:
- estimating a column vector of returns for a portfolio of assets;
- estimating a matrix of variances and covariances for the portfolio of assets;
- modifying the matrix of variances and covariances by incorporating subjective opinion of at least one analyst into the matrix of variances and covariances;
- and
- optimizing the portfolio of assets based on the column vector of returns and the modified matrix of variances and covariances.
A method for optimizing a portfolio of assets comprising:
- estimating a column vector of returns for the portfolio of assets;
- estimating a matrix of variances and covariances for the portfolio of assets;
- modifying the column vector of returns by incorporating subjective opinion of at least one analyst into the column vector;
- modifying the matrix of variances and covariances by incorporating subjective opinion of at least one analyst into the matrix;
- and
- optimizing the portfolio of assets based on the modified column vector of returns and the modified matrix of variances and covariances.
A computer program product that includes a computer-readable medium having a sequence of instructions which, when executed by a processor, causes the processor to execute a process for estimating expected risk associated with a portfolio of assets, wherein expected risk is expressed as a matrix of variances and covariances of expected portfolio returns, the process comprising:
- deriving a sample matrix of variances and covariances based on sample data relating to realized historical performance of assets in a portfolio;
- deriving a subjective matrix of variances and covariances based on subjective opinion of at least one analyst relating to expected future performance of at least one asset in the portfolio;
- and
- deriving an estimated matrix of variances and covariances for the portfolio based on the sample and subjective matrices.
A computer program product that includes a computer-readable medium having a sequence of instructions which, when executed by a processor, causes the processor to execute a process for estimating expected returns associated with a portfolio of assets, wherein expected returns is expressed as a column vector of returns, the process comprising:
- deriving a sample column vector of returns based directly on sample data relating to realized historical performance of assets in a portfolio;
- deriving a subjective column vector of returns based on subjective opinion of at least one analyst relating to expected future performance of at least one asset in the portfolio;
- and
- deriving an estimated column vector of returns for the portfolio based on the sample and subjective column vectors.
A computer program product that includes a computer-readable medium having a sequence of instructions which, when executed by a processor, causes the processor to execute a process for optimizing a portfolio of assets, the process comprising:
- estimating a column vector of returns for a portfolio of assets;
- estimating a matrix of variances and covariances for the portfolio of assets;
- modifying the matrix of variances and covariances by incorporating subjective opinion of at least one analyst into the matrix of variances and covariances;
- and
- optimizing the portfolio of assets based on the column vector of returns and the modified matrix of variances and covariances.
A computer program product that includes a computer-readable medium having a sequence of instructions which, when executed by a processor, causes the processor to execute a process for optimizing a portfolio of assets, the process comprising:
- estimating a column vector of returns for the portfolio of assets;
- estimating a matrix of variances and covariances for the portfolio of assets;
- modifying the column vector of returns by incorporating subjective opinion of at least one analyst into the column vector;
- modifying the matrix of variances and covariances by incorporating subjective opinion of at least one analyst into the matrix;
- and
- optimizing the portfolio of assets based on the modified column vector of returns and the modified matrix of variances and covariances.
Dependencies are inferred from the claim text.