LQG 2023/10/12 – 18:30 – Evaluating and Comparing Risk Model Performance – Jose Menchero – at Bloomberg – Hybrid

Evaluating and Comparing Risk Model Performance

Seminar by Jose Menchero

12th October 2023 – In-Person and On-Line – Hybrid

The LQG is very grateful to Bloomberg for hosting this seminar.

Risk models are used for three primary purposes in finance. The first application is risk management, in which case accurate volatility forecasting is the main objective. The second application is portfolio construction using mean-variance optimisation, in which case high expected risk-adjusted performance is the principal goal. The third use case is to properly decompose asset returns into factor and idiosyncratic components, with the implication that these two return components should be uncorrelated. In this talk, we present a framework for comparing the performance of risk models along these dimensions. We discuss the importance of placing the two competing risk models on a level playing field and describe “horse races” that can be used to test which model performs better.


Jose Menchero

Head of Portfolio Analytics Research

Jose Menchero serves as Head of Portfolio Analytics Research at Bloomberg. Jose and his team are responsible for developing the analytics and algorithms used for factor risk models, portfolio risk and return attribution, scenario analysis, tail risk, portfolio construction, and portfolio optimization.
Prior to joining Bloomberg, Jose was the founder and CEO of Menchero Portfolio Analytics Consulting. Before founding his consulting firm, Jose worked for eight years at MSCI, where he was Managing Director responsible for developing the Barra equity risk models, and for portfolio construction research. Jose also served for seven years as Director of Research at Thomson Financial, where he developed several risk and return attribution methodologies, as well as equity factor risk models.
Jose has over 30 finance publications in leading practitioner journals. Before entering finance, Jose was Professor of Physics at the University of Rio de Janeiro in Brazil. Jose holds a PhD in theoretical physics from the University of California at Berkeley, and a BS degree in aerospace engineering from the University of Colorado at Boulder. Jose is a CFA Charterholder.