Book Image

Python for Finance Cookbook - Second Edition

By : Eryk Lewinson
5 (1)
Book Image

Python for Finance Cookbook - Second Edition

5 (1)
By: Eryk Lewinson

Overview of this book

Python is one of the most popular programming languages in the financial industry, with a huge collection of accompanying libraries. In this new edition of the Python for Finance Cookbook, you will explore classical quantitative finance approaches to data modeling, such as GARCH, CAPM, factor models, as well as modern machine learning and deep learning solutions. You will use popular Python libraries that, in a few lines of code, provide the means to quickly process, analyze, and draw conclusions from financial data. In this new edition, more emphasis was put on exploratory data analysis to help you visualize and better understand financial data. While doing so, you will also learn how to use Streamlit to create elegant, interactive web applications to present the results of technical analyses. Using the recipes in this book, you will become proficient in financial data analysis, be it for personal or professional projects. You will also understand which potential issues to expect with such analyses and, more importantly, how to overcome them.
Table of Contents (18 chapters)
16
Other Books You May Enjoy
17
Index

Evaluating an equally-weighted portfolio’s performance

We begin with inspecting the most basic asset allocation strategy: the equally-weighted (1/n) portfolio. The idea is to assign equal weights to all the considered assets, thus diversifying the portfolio. As simple as that might sound, DeMiguel, Garlappi, and Uppal (2007) show that it can be difficult to beat the performance of the 1/n portfolio by using more advanced asset allocation strategies.

The goal of the recipe is to show how to create a 1/n portfolio of the FAANG companies (Facebook/Meta, Amazon, Apple, Netflix, and Google/Alphabet), calculate its returns, and then use the quantstats library to quickly obtain all relevant portfolio evaluation metrics in the form of a tear sheet. Historically, a tear sheet is a concise (usually one-page) document summarizing important information about public companies.

How to do it...

Execute the following steps to create and evaluate the 1/n portfolio:

  1. Import...