With about half the funds having reported, it's now time to update our data and forecasts for the dynamic trading risk factor. As is our practice, we're doing this after about 50% of the fund universe has reported. This gives us an early estimate of a number that is not much likely to change during the rest of the month. For a variation, I've fitted the histogram of monthly returns to an Student's t distribution, rather than my normal usage of the Generalized Error Distribution.

From the above chart, we are starting to see a deficit of events in the 0%/month bin and an excess in the 2%/month bin. They are counts of 1 and 11 with an expectation of approximately 5 in each case. With a Poisson Distribution, the probability of drawing 1 or fewer events with an expectation of 5 is 4.0%. The probability of drawing 11 or more is 0.55%. The deficit of may be dismissed as a binning anomaly; however, the surfeit at 2% is a little more interesting. We have a less than 1% probability of this occuring by chance. Furthermore, 2% is a suspiciously round number. Going forward, we shall have to watch this bin with interest.

Out-of-sample, our final forecast of the return for June, 2009, was 2.17% (our early forecast was 2.11%), and the realization was 1.03%. At this point, we are forcasting a 0.75% return for July. These forecasts represent an a priori expected monthly return for any fund or firm that makes it's living by trading.