I already have my education in finance but I enjoy crafting retirement calculators to keep my skills sharp. The ONE area that has eluded me has been MC analysis and you are the first person to present it in a clear, easy to understand format! Also, a tip I came across from my work is using CTRL+SHIFT+Down Arrow will automatically select all your data and nothing more. CTRL+D will fill the selected formula all the way to the bottom. Here's hoping someone gets a little use out of it!
Thanks for the video! Just wondering, how do you handle the occasional simulated return of less than -100%? particularly for assets that might have higher standard deviations? Occasionally, I'm getting a simulation trial where a year's return just flips the sign of the total portfolio. I feel like the portfolio shouldn't be able to lose more than 100% of it's value.
This is very insightful and helpful. Could you explain whether the future value in this example would more likely be the average (around $5.7 million) or the median ($4.6 million +/-) and why?
Can you do another one with showing examples of distributions. Not just accumulations. Thank you for the excel. I have been trying to create this for awhile.
Enjoyable video for Monte Carlo Sim example. For savings growth, wouldn't you need an interest rate model rather than a normal distribution assumption?
excellent lecture 👍 this video actually helped me finally understand monte carlo now, whereas before I never really understood it when going through the CFA L1 or Mark Meldrum content i really like the retirement savings example you used too 😃
I have come across a research paper in which they have developed regression models using past data (uptil 2016). The pdfs of variables were already known from literature review. For 2017 onwards, they utilized the forecasted values as the mean of the distribution and took 10% of that mean as standard deviation for each year, and performed MCS to calculate annual uncertainty. Is there any relation or basis for taking 10% of mean as SD for future uncertainty analysis? I have analyzed the past data as well SD is nowhere near 10% of the mean value.
Using a normal distribution to estimate stock returns is from wjat I hear a bad idea, amd results in am overly optimistic result. A different distribution is mkre accurate
