Notebooks

Each notebook starts from an idea in the empirical asset pricing literature and turns it into a portfolio an investor could hold. All notebooks draw on the same data sources and report the same performance measures, so their results can be compared directly.

Minimum-Variance Portfolios

Implementing the Minimum-Variance Portfolio Estimate the global minimum variance portfolio of the 100 largest U.S. stocks from a rolling 60-month window, where the sample covariance matrix is singular, use short-sale constraints to make the problem solvable, and compare the resulting long-only portfolio to the value-weighted market with CRSP data.

Minimum-Variance Portfolios from Daily Returns Estimate the covariance matrix from daily returns for universes of 50 to 500 stocks and windows of 6 to 60 months, and show that what matters is the complexity c = N / (T - 1), the ratio of stocks to observations, rather than the frequency of the data.

Stochastic Discount Factors

An SDF for the Factor Zoo Estimate the maximum-Sharpe portfolio of 153 U.S. factors, which is also the stochastic discount factor that prices them, shrink it with a ridge penalty, and test whether the complexity c = N / T governs its out-of-sample Sharpe ratio as it governs the volatility of the minimum-variance portfolio.