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Views on non-Normal markets [69]

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Bullet points include: Use a different importance criterion. One that also includes ‘fat-tailed-ness’ or other measure of ‘meaning’. E.g. maximise sigma (1+cK), where K is the kurtosis, sigma the tracking error (standard deviation) and c is some constant that represents a trade-off between concentrating on maximising variance and concentrating on maximising kurtosis (if c = 0 then equivalent to PCA). Akin to Cornish-Fisher 4th moment approach to estimating quantiles of a Non-Normal distribution (with zero skew)

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