EWMA
Estimate expected risk, correlation matrix, or covariance matrix for assets using the exponential-weighted moving average risk model (EWMA).
Last updated
Estimate expected risk, correlation matrix, or covariance matrix for assets using the exponential-weighted moving average risk model (EWMA).
Last updated
Practitioners may want to consider the relevance of more recent events relative to observations further in the past. The exponentially-weighted moving average (EWMA) model calculates covariances by placing more emphasis on recent observations via a decay factor,.
For a detailed description on the decay factor and its relationship to half-life, please see https://wpahelp.windhamlabs.com/expected-risk/exponential-risk#half-life
The following describes the function signature for use in Microsoft Excel's formula bar.
type
Required. Enumeration string to specify calculation type: "risk", "sigma", or "stdev" "correlation", "corr", or "rho", "covariance", "covar", or "cov"
assetReturns
Required. Time series or matrix of asset returns.
lambda
Required. Decay factor, scalar.
dataPeriodicity
Optional. Periodicity of the data, used for annualization. If you do not enter the argument, it defaults to 1. e.g. Daily = 255, Monthly = 12, Yearly = 1, Quarterly = 4.
Depending on the specified output type, the function will return the respective vector of risk estimates (annualized standard deviations), correlation matrix, or a covariance matrix.
