A Division of Windham Capital Management, LLC

Implied Returns

Given a set of portfolio weights and a covariance matrix there is a set of expected returns, we term “implied returns,” which deem those portfolio weights optimal.

This can help investors understand the implicit assumptions of maintaining their current portfolio weights. 

An investor may choose to rebalance their portfolio if the implied returns are substantially different from the asset returns that could be realistically expected in the forthcoming period.

Category:Understanding the Software -> Return Estimation