Monte Carlo portfolio statistics interpretation


Can someone explain (or provide a reference where the doco explains) how to interpret the portfolio characteristics in the Monte Carlo reports? The mean and median returns are obvious but the ratio and beta are not, in light of the footnotes.

This is an example from a real portfolio in my database:

name, mean, median, ratio, beta
Portfolio 7, 8.816530, 7.696545, 0.213744, 0.050498

Does the ratio simply describe the portfolio in terms of comparison to the variance of large caps real return? In the example above, the portfolio varies only 20% as much as a 100% large cap portfolio would?

Sorry, but I don't get the log business for the beta. I know what logs are but I don't know what you're doing with them here.



The .213744 means that the variance of the portfolio in question is about one fifth as large as a variance on large caps. So your understanding is correct. The beta is showing the correlation of the return on the portfolio in question with the return on large caps. best, Larry

And does complete correlation with large cap return = 1?


Larry, I don't want to beat this to death but I'm still unclear on the portfolio beta value in Monte Carlo reports.

As a test I created a portfolio of 100% large cap stocks. The reported beta is 0.039852. 10^0.039852 = 1.096. If that's an appropriate calculation, I'm guessing difference is a result of Monte Carlo randomness.

In comparison, a portfolio of 100% TIPS has a beta of 0.084989. 10^0.084989 = 1.216. If that calculation is appropriate, that means the beta of 100% TIPS is greater than the market? That seems unlikely?

I conclude that my understanding is wrong. Can you please inform me how to determine the beta of a portfolio, expressed in traditional terms, using the values shown in the Monte Carlo reports?

Thanks for your patience.


Chris, This doesn't sound right. Let me check what's going on. best, Larry

It's probably a total misinterpretation by me of the meaning of "beta" in the portfolio characteristics report. But I can't find an explanation? I'd greatly appreciate understanding it in comparison to the traditional meaning of beta, which I understand.

My error. For the TIPS calculation I copied the portfolio ratio instead of the beta. Rather than 0.084451 (most recent run) it's -0.005250.

I still don't know how to interpret it. I hope to use it as a guide to adjusting the allocations.