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1 January 2013 Financial Analysts Journal Volume 69, Issue 1

How to Combine Long and Short Return Histories Efficiently

  1. Sébastien Page, CFA

A common challenge in portfolio risk analysis is that certain assets have shorter return histories than others. Unfortunately, many standard portfolio risk analysis techniques—including historical tail risk measurement, regime-dependent risk analysis, and bootstrapping simulations—require full return histories for all assets or risk factors. The author presents easy instructions on how to efficiently combine data for investments whose histories differ in length and offers a new model to better account for non-normal distributions.

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