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conformist
22 days ago
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Weighting an average to minimize variance
Yeah and this is a much more intuitive way of generalising from the n = 2 case. Weights are proportional to inverse variance even for n > 2. Importantly this assumes independence so it doesn’t translate to portfolio optimisation very easily.
rhymer
22 days ago
[–]
Right, this is known as the inverse variance weighting
https://en.wikipedia.org/wiki/Inverse-variance_weighting
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