Risk data

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The risk of the various assets is stated as a percent of the risk of U.S. Large stocks - I presume the S&P 500. I have two questions about that:

1. Does the risk data include the 2007-2009 crash and recovery? Please publish the actual numbers you are using. (Maybe you have but I don't know where.)

2. Do you also use co-variance statistics. Without them Monte Carlo is not nearly as good as it would be with them.

3. Could you include a choice whereby the returns are not randomly generated from the stats but rather use some rolling sampling method from past data. This would help deal with trends and also fat tails. As per this web-site:

http://www.prospercuity.com/cover_up.htm

Thanks

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Submitted by jim@pinneyandsc... on 25 January 2010 - 8:37am.
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Comments

1
From: Dick Munroe

1. Yes (Pending the availability of the 2010 yearbook since covariance requires equivalent time periods to calculate). See Ibbotson's Classic Yearbook and various Dow Jones Indices for details.

2. Yes.

3. No time soon but I'll put it on the list for discussion.

Best,

Dick Munroe

2010-01-26 07:17
2
From: Dan Royer

There's a spreadsheet attached to a link in the middle of this FAQ:

http://www.esplanner.com/faq-how-do-i-create-custom-assets-monte-carlo

That spreadsheet will calculate the numbers for you. If you are handy with Excel, you can also view some of calculations used to provide these results.

Dan

2010-01-26 10:18