The Opportunity Set: Market Opportunities And The Effective Breadth Of A Portfolio

摘要

The opportunity set, defined as OS ≡(γ' Ω~(-1) γ)~(1/2) measures, is in an ex post sense the opportunities that were available in the market to investors. If, for example, ex post returns volatility was high relative to the covari-ance matrix of returns, then a long/short investor was offered exceptional opportunities. Whether the active manager was able to capitalize on this depends on the level of investment skill and the aggressiveness of the portfolio.