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The Windham Global Market Portfolio - more information

How are Equilibrium returns calculated when I check the box to use the Windham Global Market Portfolio?

To calculate Equilibrium returns, we first calculate the beta of each asset with respect to a diversified market portfolio.  Within the software you have the choice of customizing this reference portfolio by un-checking the box and specifying the weights.  Most users, however, use the reference portfolio that Windham has defined.  The asset classes and weights of the Windham Global Market Portfolio can be found here: Market Portfolio Weights

To calculate the Beta of each asset to the Windham Global Market Portfolio , the software must recalculates a new risk and correlation estimate that includes the assets within your case and the new Global Market Portfolio asset.  It always uses the historical risk model to recalculate this new risk and correlation estimate.

Missing Data or Different Start Dates
If there are any time series within your case file that begins prior to the start date of the Windham Global Market Portfolio (February 1991), the software employs a technique called Maximum Likelihood Estimate (MLE) to make use of all available data.

Related Articles

  1. Market Portfolio Weights
  2. Equilibrium Returns

Category:Understanding the Software -> Return Estimation