Large Language Models such as GPT-3, ChatGPT, Bing AI, and Google Bard have recently demonstrated stunning advances in conversational capabilities, text summary, translation, code creation and many other applications. Microsoft’s new AI-powered search assistant Bing showed how these capabilities can be further enhanced by allowing the AI agent to access conventional search engines and read … Read more
In finance, the performance of an asset is often quantified by alpha (the excess returns above a benchmark return) and beta (the volatility or risk of the asset relative to a benchmark). In this post, we develop time-varying, probabilistic versions of alpha and beta, and go through the process of using these new metrics to build a dynamic stocks/bonds portfolio to improve on the classic 60/40 portfolio.
In this post we will take a closer look at the expected return that is often stated for investments like stocks and other financial assets, or for certain outcomes in gambling. The point we want to convey is that the expected return is only valid for one period or a single “iteration” (say, one year, … Read more