Python for Finance Cookbook

Evaluating the performance of a basic 1/n portfolio

We begin with inspecting the most basic asset allocation strategy: the 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, calculate its returns, and then use a Python library called pyfolio 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 ...