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An algorithm for the orthogonal decomposition of financial return data

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  • Vic Norton

Abstract

We present an algorithm for the decomposition of periodic financial return data into orthogonal factors of expected return and "systemic", "productive", and "nonproductive" risk. Generally, when the number of funds does not exceed the number of periods, the expected return of a portfolio is an affine function of its productive risk.

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  • Vic Norton, 2012. "An algorithm for the orthogonal decomposition of financial return data," Papers 1206.2333, arXiv.org, revised Nov 2014.
    • Handle: RePEc:arx:papers:1206.2333
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    References listed on IDEAS

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    1. Andras Niedermayer & Daniel Niedermayer, 2006. "Applying Markowitz's Critical Line Algorithm," Diskussionsschriften dp0602, Universitaet Bern, Departement Volkswirtschaft.
    2. Vic Norton, 2011. "Notional portfolios and normalized linear returns," Papers 1104.5393, arXiv.org.
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