Q4: Scott Sanderson – Portfolio Optimization: Risk Preferences In, Trades Out
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How to Avoid Biasys in Portfolio Optimization
When quants are designing their risk models and building constructing portfolios they need to be mindful of biases again or not so much. I mean you anytime you're doing any kind of statistics on data You have to be mindful Of Biasys creep in and really subtle ways. What can be really easy to do is Introduce something like look ahead bias into that validation process in which you don't shift your data the right way by accident. And it's a problem for anybody who has ever tried this but for anybody who actually wants to solve it, just remember one thing: Don't run into biased assumptions.
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