Sampling James R. Thompson's inspired nonparametric portfolio approaches

Abstract

Asset or security returns are an example of phenomena whose distributions still cannot be convincingly modeled in a parametric framework. James R. (Jim) Thompson (1938–2017) used a variety of nonparametric approaches to develop workable investing solutions in such an environment. We review his ground breaking exploration of the veracity of the capital asset pricing model (CAPM), and several nonparametric approaches to portfolio formulation including the Simugram™, variants of his Max‐Median rule, and Tukey weightings. This article is categorized under: Applications of Computational Statistics > Computational Finance Statistical and Graphical Methods of Data Analysis > Transformations Statistical and Graphical Methods of Data Analysis > Modeling Methods and Algorithms