Page 5 of Chapter 14: Portfolio Construction (Grinold) states the following
Consider for instance, an Information Coefficient (IC) of 0.05 and a typical residual risk (volatility) of 30 percent would lead to an alpha scale of 1.5 percent (0.05 x 0.3 = 1.5%).
In this case, the mean...
Hi @David Harper CFA FRM CIPM
This is probably a trivial question.
In the notes to Grinold (and in the reading itself) about Alpha scaling it states:
...the original alphas have a standard deviation of 2.00 percent and the modified alphas have a standard deviation of 0.57 percent. This...
Could you please explain the process of Scaling and Trimming alphas
(in the Topic - Grinold & Kahn. Chapter 16 - Refining Alphas - Scaling and Trimming Alpas - AIM 53.2)
1) how do i interpret this formula for scaling :
Alpha = (Volatility) x (Information coefficient) x (Score)...
I’ve had some confusion, misunderstanding and doubts when doing 09 Level I Annotated Boot Camp. Appreciate your kind help on this!
I’ve noticed an important difference between you and FRM handbook with respect to calculating information ratio: in all your practice...
I was referring to the formula on slide 4 and 5 for the total risk and then to the formula used in the excel sheet 8-a-1 in C15 for the total risk.
The formula there is "=C2+C6+C11+C13", should it not be "=1+C2+C6+C11+C13"
I have a question
A portfolio underperformed its benchmark by 2%.what can we say about alpha ?
a. alpha is -2%
b.alpha is definitely negative
c.alpha can be positive or negative
answer given is c . I can guess it to be c but can I have a more intuitive explanation from you...