Q4: Scott Sanderson – Portfolio Optimization: Risk Preferences In, Trades Out
Chat With Traders
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The Risk Aversion of Quantitative Trading Strategies
When you have some quantitative Trading strategy you reach a point in your model where you built some prediction of what's going to happen But you're not sure about that prediction, right? So on the one hand you want to put as much of your money as you can in the assets that you believe are going to go up or down. On the other handYou want to mitigate the possible risk that One of your predictions is wrong,. especially if it might be badly wrong. The optimal portfolio for us would be to put all of our money in the asset that had the largest expected returns and we'd rather spread out our allocation across smaller number of assets.
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