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From |
P Ram <analyst.q@gmail.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: RE: RE: Methodology question |

Date |
Sun, 20 Jun 2010 15:37:44 +0400 |

Dear Nick, Thanks so much for your helpful comments. Apologies for not replying earlier...my net conn was down. I fully agree with your thoughts. Thanks so much for taking the time to share them with us. Kindest regards, Prasad Kindest regards, Prasad On Thu, Jun 17, 2010 at 1:40 AM, Nick Cox <n.j.cox@durham.ac.uk> wrote: > The implied reference is > > Harrell, F. 2001. Regression modeling strategies. New York: Springer. > > I also have a more general comment. Postings of the forms > > "I have this plan. What comments do you have?" > > "What should I do be doing in my project?" > > "I am doing this. Is this correct?" > > are unlikely to get much response. That is a statement of probability > and in no sense implies a ban or rules out your good fortune that > someone may have something interesting or useful to say. In practice, it > is difficult to say what does and does not make sense for anybody else > to do. We do not know the context, or the data, or at what level the > person is operating. Also, it is tricky often: Something may look like > someone's project for a course or degree. Shouldn't the students be > working that out themselves, not pleading support on the net? > > The most successful threads on this list, at least in my experience, > grow out of Stata-specific questions, which sometimes morph into > interesting questions of statistical principles or practice. The other > way round doesn't work so well. Again, I deal in probabilities here, not > certainties. What else would you expect on a statistical list? > > Nick > n.j.cox@durham.ac.uk > > Lachenbruch, Peter > > This procedure is essentially a stepwise regression and has all the > headaches associated with this procedure. The book by Frank Harrell in > Springer series (about 2002) discusses this. You might also investigate > the lars command, but you need to read up on variable selection methods > a bit. > > Prasad Ramani > > I am new here and my question is quite different from what is normally > asked here. I have a few questions more from an application point of > view. > > The Project > =========== > I am analyzing a multi asset class portfolio whose composition has > changed over the years from mainly equities to a mix of equities, > fixed income, hedge funds & private equity. The objective of the > analysis is to find which risk factors the portfolio is exposed to and > how to hedge them. The data is a monthly series of returns of this > portfolio for the past 7-8 years. > > My Proposed Methodology > ==================== > 1. Get monthly returns for a list of indices that represent the major > asset classes: For equities: SP500, MSCI World etc., for Fixed Income: > BarCap US Aggregate Bond fund, JP Morgan Emerging Market Bond index, > for Commodities: Gold, Oil, for Interest rates: 3 month LIBOR etc. I > end up with about 15 such factors...Factor 1 to Factor 15. > > 2. I come up with a correlation structure for these 15 factors based > on weekly/monthly returns going back to about 3 years. > > 3. I regress the returns of my portfolio against these 15 > factors...and based on the t-stats of the factors and the overall adj > r-squared, I eliminate those factors that are insignificant at 5% > level. > > 4. I expect the ones with low t-stats to be highly correlated to some > other factors...and this can be verified from the above Var-Covar > matrix (point 2) > Finally I end up with those factors that have significant t-stats, > F-stat and adj r-squared. > > I would really appreciate if you can give me your views on this. > > > * > * For searches and help try: > * http://www.stata.com/help.cgi?search > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ > * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**References**:**st: Methodology question***From:*Prasad Ramani <analyst.q@gmail.com>

**st: RE: Methodology question***From:*"Lachenbruch, Peter" <Peter.Lachenbruch@oregonstate.edu>

**st: RE: RE: Methodology question***From:*"Nick Cox" <n.j.cox@durham.ac.uk>

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