by Laurens A. P. Swinkels, Ronald Q. Doeswijk
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Suggested foundations for financial time series and portfolio construction. Specialist prerequisites vary by paper.
Check whether a relationship can be estimated consistently over time.
Read the fitted relationship and its residuals.
Understand the covariance structure of portfolio risk.
Read objectives, constraints and optimality conditions.
Study long-run relationships without confusing them with correlation.
Check the assumptions behind reported estimates.
Construct allocations and examine sensitivity to estimated inputs.
Choose a reproducible strategy, specify the trading rule, and test what remains after costs and estimation uncertainty.
Connect diversification, common risk factors, investor views, and the properties of a risk measure.