EVI-Emerging Asia - EDHEC-Risk

Methodology: Robustness
• We employ techniques from robust statistics to
reduce noise and increase resistance to outliers.
The assumption is that cross-sectional data is
contaminated.
• Using equal weights w it = 1/N in the estimator or
e.g. cap-weights, results in a lot of noise.
• We adjust the weights to the sample so that the
outliers get smaller weights (w it = 0 for severe
outliers) and the returns from the center of the
distribution get equal weights.