Improved Risk Reporting with Factor-Based Diversification Measures

Improved Risk Reporting with Factor-Based Diversification Measures — February 2014

Appendices

Figure 6: Diversification Measures for the Stoxx Europe 600 at a Yearly Frequency and Using Rolling-Windows of 1 Year for the Covariance (Entropy Metric)

These figures display the effective number of constituents (ENC) and the effective number of uncorrelated bets (ENB) computed with an MLT approach for the Stoxx Europe 600. The MLT method is based on a robustified version of the sample covariance matrix estimated with rolling-windows of 52 weeks of constituents’ returns between August 1999 until the end of May 2013.

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An EDHEC-Risk Institute Publication