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Equally Weighted Estimates

This article discusses the implications and limitations of using equal weights to historical data to derive volatility estimates and forecasts. More precisely, we will discuss:

  • definition and application of equally weighted averages to compute volatilities and correlations
  • pitfalls and limitations of this approach
  • difference between conditional and unconditional measures
  • precision of the estimates and definition of correct confidence intervals

Find the source code for this article in the offical Github repository at the link: github.com/gbaglini/baglinifinance

Gianluca Baglini
Gianluca Baglini

Quantitative Researcher & Investment Analyst

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