this lesson => Buffet said two things
=> (1) investor skill
=> (2) breadth / the number of investments
Grinold's Fundamental Law
breadth => more opportunities to applying that skill => eg. how many stocks you invest in
IC => information coefficient
BR => breadth / how many trading opportunities we have
The Coin Flipping Casino
Which bet is better?
Coin-Flip Casino: Risk
Coin-Flip Casino: Reward/Risk
Coin-Flip Casino: Observations
Coin-Flip Casino: Lessons
（1） higher alpha generates a higher sharpe ratio
(2) more execution opportunities provides a higher sharpe ratio
(3) sharpe ratio grows as the square root of breadth
Back to the real world
IR, IC and breadth
The Fundamental Law
skill is harder to be increased than breadth
Skill => introverted
Breadth => extroverted
Simons vs. Buffet
What is risk?
Visualizing return vs risk
Building a portfolio
Can we do better?
Harry discovered the relationship between stocks in terms of covariance
resulting of the portfolio is not just a blend of the various risks
right stocks picking => outliers
Why covariance matters
Mean Variance Optimization
The efficient frontier
