Hopefully the new framework may be of interest to this community:
http://ssrn.com/abstract=2436478
Here is the abstract:
It is found that partial correlations between the major US equity ETFs
conditioned on the state of economy (mimicked by S&P 500) differ
dramatically from their Pearson’s correlations. The mean-variance
portfolio theory is reformulated in terms of partial covariance.
Performance of various two-asset portfolios formed by the US equity ETFs
is analyzed. It is found that on average, the best long-only mean
partial covariance portfolios outperformed the best long-only mean
covariance portfolios in 2007-2013.
Comments will be greatly appreciated. Also I wonder if there is an
R-based software package for portfolio management that allows for easy
replacement of Pearson covariances/correlations with their partial
values.
Thanks! Alec
_______________________________________________
R-SIG-Finance@r-project.org mailing list
https://stat.ethz.ch/mailman/listinfo/r-sig-finance
-- Subscriber-posting only. If you want to post, subscribe first.
-- Also note that this is not the r-help list where general R questions should
go.
