Theory says mean-variance. Practice says inverse volatility. The truth is in between, and the choice matters. Four methods, one decision Given a set of N candidate strategies, you must decide how much capital to allocate to each. This is the central operational problem of multi-strategy investing, and there are essentially four families of answers, with […]
Better strategies compound linearly. More strategies compound roughly with the square root. The math is decisive. The mistake most quants spend years making Most quantitative researchers begin their careers chasing a Better Strategy. The premise is intuitive: more skill, more research, more iteration, eventually produces a superior alpha source. The Sharpe ratio goes up. The […]
A Deflated Sharpe Ratio is not an allocation decision. Here is how to turn it into one. A number is not an action The previous post in this series walked through the math and the honest implementation of the Deflated Sharpe Ratio. We ended with a number — a calibrated probability between 0 and 1 […]
The formula is twenty lines of Python. What kills you is the inputs. Why a raw Sharpe Ratio is a lie of omission Every quantitative trader has computed a Sharpe ratio. Most have published one to an audience — an allocator, a risk committee, a partner, a tweet thread. The Sharpe is intuitive, comparable across […]
Allocation under real constraints, multi-scenario evaluation, and the monitoring discipline that keeps the portfolio honest after launch. The gap between a score and a portfolio The composite score from the previous post tells you, for each strategy in your universe, the probability that its edge is real. It does not tell you how many contracts […]
Four statistical tests, one number. How to design a composite that defends against survival bias without throwing away signal. Why a composite rather than a gate In the previous post I described four diagnostic tools for survival-bias correction: the Deflated Sharpe Ratio, Haircut Sharpe, Probability of Backtest Overfitting, and bootstrap-based Stability selection. The natural […]