These students attempt to add value to the portfolio by investing in undervalued stocks discovered through in - depth fundamental
analysis of individual firms.
This basically comes down to the
actions of individual firms and their investment plans, and we have managed to track this reasonably well through conversations with the firms themselves.
Now, one can estimate this relationship using a non-linear optimizer (Solver in Excel can do it), regressing actual market volatility on the
volatility of the individual firm, allowing for no intercept term, and constraining the errors to be positive, because firm specific variance can't be negative.
[Ron] Beller [of failed hedge fund manager Peloton] wrote to his investors: «Because of their own well - publicised issues, credit providers have been severely tightening terms without regard to the creditworthiness or track
record of individual firms, which has... made it impossible to meet margin calls.»