The Impact of ChatGPT on Investing with Alejandro Lopez-Lira
Excess Returns
00:00
Hedging the Systematic Variance of Portfolios
We're forming portfolios for the non-spectory charts and then hedging the systematic variation of those portfolios. What we find is no matter what you do it's always better to hedge all of the systematic variation because you end up with the same expected return but with so much lower rates. We also have a small linear algebra part in the paper for full optimization where we say like this is the best way if you have your measure of expected returns and you have your betas this is thebest way to imagine, he says.
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