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Additional RSO Backtests

October 15, 2013

Another blogger worth following is Michael Guan from Systematic Edge.  Michael writes frequently about different methods for asset allocation. Some of his posts for example on Principal Components Analysis (PCA) are very comprehensive and well worth reading. Recently he wrote a post showing some additional tests using the Random Subspace Optimization (RSO) with maximum sharpe optimization (long only) on various universes with a step parameter test for “k.” The results are interesting and support the following conclusions: 1) RSO is a promising method to increase return and reduce risk 2) the choice of “k” is important to get the best results.  I will present a few more ideas on extending RSO to follow.

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