Tracking your portfolio

[skthewimp]

Another amazing insight from fooled by randomness. The essence of this is that if you are a passive investor, the more often you track your portfolio, the more your headache. Suppose you have invested in a portfolio where the expected annual return is R%, and the volatility is V%. The insight is that the more often you track your portfolio, the

Comments

[shrikanthk]

how did you (he) extrapolate the std deviations for smaller time periods?

[shrikanthk]

Sry...didn't read the latter part...guess it was a later update

[skthewimp]

nope it was there right in the beginning!
maybe you didn't read carefully enough

[anonymous]

Have you assumed a normal distribution for returns? And,it doesn't matter what the probability of getting a return >0 is.It's how much you make when it is >0, and conversely,how large your losses are when it is <0.In Taleb's words,it's the expectation that counts.Not the probability.This is precisely the problem with fat-tails(non-normality).

[skthewimp]

i'm not talking about money here. i'm talking about headache. if you are just "checking out" your portfolio and don't plan to make any changes to it, all that matters is whether you've made more money or less money on it.

oh and today i came to the part where he talks about expectation and not probability

can you please idenfity yourself, btw?

[anonymous]

Can you throw some light on how to estimate the probabilities for returns. What major factors play role in estimating these?

Vijay

Very strong!

[ext_26467]

Very very nice!

Variance

[anonymous]

Um, pardon my ignorance, but given independent returns, why does the variance vary proportionally with time? (I understand why the mean drops proportionally.)