How to Combine Long and Short Return Histories Efficiently

A common challenge in portfolio risk analysis is that certain assets have shorter return histories than others. Unfortunately, many standard portfolio risk analysis techniques—including historical tail risk measurement, regime-dependent risk analysis, and bootstrapping simulations—require full retur...

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Bibliographic Details
Published in:Financial analysts journal 2013-01, Vol.69 (1), p.45-52
Main Author: Page, Sébastien
Format: Article
Language:English
Subjects:
Algorithms
Assets
Bootstrap mechanism
Covariance
Data sampling
Distribution
Efficiency
Estimates
Great Depression
History
Investment
Investment risk
Kurtosis
Mathematical moments
Maximum likelihood estimation
Measurement
Missing data
Modeling
Normal distribution
Portfolio Management
Predisposing factors
Recycling
Return on investment
Risk
Risk assessment
Simulation
Stocks
Studies
Time series
U.S.A
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Summary:A common challenge in portfolio risk analysis is that certain assets have shorter return histories than others. Unfortunately, many standard portfolio risk analysis techniques—including historical tail risk measurement, regime-dependent risk analysis, and bootstrapping simulations—require full return histories for all assets or risk factors. The author presents easy instructions on how to efficiently combine data for investments whose histories differ in length and offers a new model to better account for non-normal distributions.
ISSN:0015-198X
1938-3312
DOI:10.2469/faj.v69.n1.3