Hi,
This topic isn't that much related here, but I'll try anyway..I have made a regression, and based on one financial model the regression coefficients equal the portfolio weights I need. If the coefficients are following, there's no problem obviously in calculations:
coefficients:
b1=4
b2=5
weights:
w1=4/9
w2=5/9
However, if one of the coefficients is negative, how do i calculate the weights? Intuitively calculated as follows:
b1=4
b2=-5
b1+b2=-1
w1=4/-1
w2=-5/-1
More intuitive result obviously would be that w1 is positive and w2 negative..Calculation is simply but can't seem to decide which is the correct approach...