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Views on non-Normal markets [3]

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Bullet points include: Extreme events and ‘fat tails’. Fat-tailed behaviour in individual return series. What causes fat-tailed behaviour? Fat-tailed behaviour in multiple, i.e. joint, return series. Possible selection effects arising from active management. Portfolio construction in the presence of fat tails. Appendices: A. PCA vs ICA – magnitude versus meaning. B. System-wide leverage effects. C. Model risk and back-testing. D. Stress testing

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