Browsing: Finance & Economics

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Finance & Economics

A Brief History of Asset Allocation

Oct 16th, 2018 | Filed under: Algorithmic and high-frequency trading, Business News, CAPM / Alpha Theory, Crowdfunding, Emerging Alternative Investments, Finance & Economics, Financial Economics Theory, Hedge Fund Strategies, Hedge Funds, Newly Added, Other Topics in A.I., Risk management, Risk Management Strategies & Processes, Risk Metrics and Measurement, The A.I. Industry

Glassbridge has put out an ambitious white paper about the “evolution of asset allocation across the investment management industry,” one that begins with the basics of the Capital Asset Pricing Model and ends with quantitative analysis and crowdsourcing. The premise is that new strategies, and new ranges of data, areRead More


National Market System: What to End; What to Mend

Oct 14th, 2018 | Filed under: Algorithmic and high-frequency trading, Business News, Commodities, Newly Added, Regulatory, Regulatory Environment, The A.I. Industry

The Principal Traders Group of the Futures Industry Association (FIA PTG) recently offered its thoughts on market structure, outlining one direction of reform for the Securities and Exchange Commission’s Reg NMS. Reg NMS (National Market System) was promulgated in 2005, in order to ensure competition among markets, and in theRead More


Peeling the Onion of Equity Hedge Fund Alpha

Oct 4th, 2018 | Filed under: CAPM / Alpha Theory, Equity Hedge Funds, Finance & Economics, Financial Economics Theory, Hedge Fund Strategies, Hedge Funds, Newly Added, The A.I. Industry

The founder of CEO of MSR Indices, a Parsippany, N.J.-based index-investors consultancy, has authored a white paper on target volatility, also known as intertemporal risk parity. The gist of the paper is that: (1) equity hedge funds do secure alpha for their investors, obvious if one measures their performance againstRead More


Modi Operandi

Oct 1st, 2018 | Filed under: Emerging markets, Frontier markets, Macroeconomics, Newly Added, The A.I. Industry, The Global Economy & Currencies, What about beta?

By Bill Kelly, CEO, CAIA Association What’s your liquidity M.O.? If you are less than certain, it is time to look east toward the country of India and the land of Modi. After all, when 1.3 billion people cough there is a decent chance the rest of the world justRead More


Cryptocurrency Arbitrage: Two Looks

Sep 27th, 2018 | Filed under: Currencies, Digital currencies, Emerging Alternative Investments, Finance & Economics, Newly Added, Other Topics in A.I., The A.I. Industry, The Global Economy & Currencies

Do investors arbitrage cryptocurrencies? Two recent studies offer a “yes” answer, though they in certain other respects differ significantly in their conclusions. Specifically, one study shows that in one respect arbitrage has done its duty and effectively eliminated the opportunities for arb profits, enforcing efficiency. In other situations, though, theRead More


The View from Las Vegas: Quiet Buying? Aggressive Buying?

Sep 23rd, 2018 | Filed under: Alternative Investments in Context, Commodities, Commodities: Examples, Digital currencies, Emerging Alternative Investments, Emerging markets, Gold, Newly Added, Personalities in AI, The A.I. Industry

On Sept. 24, the 9th Annual Inside Alternatives and Asset Allocation event convenes at Wynn Las Vegas, with CAIA sponsorship. The purpose of the event: to look beyond traditional alternative investments and strategies, to take the measure of a new breed of alternatives, including impact/SRIs, cryptocurrencies, and the application ofRead More


10 Years Later: Glasner Looks Back at the GFC

Sep 20th, 2018 | Filed under: Equity Hedge Funds, Finance & Economics, Hedge Funds, Macroeconomics, Newly Added, The A.I. Industry, The Global Economy & Currencies

David Glasner, an economist with the Federal Trade Commission, in a new Mercatus Research Paper, offers what he calls a “deeper explanation of the financial crisis of 2008 and the subsequent recovery.” Deeper than what? Deeper than attributing the bust to the bursting of the housing price bubble. Glasner’s newRead More


Prepping for an Emerging Market Rebound

Sep 17th, 2018 | Filed under: Currencies, Emerging markets, Finance & Economics, Newly Added, The A.I. Industry, The Global Economy & Currencies

Two executives at the Neuberger Berman Group have prepared a paper on what they call the “overall case for a recovery in emerging market debts” in the months to come. Investors will want to “be around” for such a rebound, they say. There are obviously now, and there will continueRead More


Are ICOs Encoding Their Governance Promises?

Sep 16th, 2018 | Filed under: Currencies, Digital currencies, Emerging Alternative Investments, Finance & Economics, Newly Added, Other Topics in A.I., The A.I. Industry, The Global Economy & Currencies

Scholars affiliated with the University of Pennsylvania recently produced a paper about digital currencies and initial coin offerings, “Coin Operated Capitalism.” The gist of the paper is that the purchase of such tokens may be riskier than investors have thus far been led to expect and may entail more risk thanRead More


Oil Trading and Round Number Effects

Sep 13th, 2018 | Filed under: Behavioral finance, Commodities, Commodities: Examples, Finance & Economics, Financial Economics Theory, Investing in Commodities, Newly Added, oil, The A.I. Industry

The “round number effect” is an endless source of fascination in the worlds of both trading and statistics. Human brains, after all, tend to think in round numbers. A market pundit on television may say, “If the price of stock XYZ gets below $8.00, it’ll be worth buying.” He won’tRead More


Back to the 1980s for future market insights

Sep 6th, 2018 | Filed under: Business News, Economics, Finance & Economics, Newly Added, Other Topics in A.I., The A.I. Industry

Christina Zhu, of the University of Pennsylvania, in a recent paper, looks at the consequences of Big Data for corporate management. What “Big Data” means depends on who is talking or writing about it. For economists working within the classic microeconomic framework, it means a drastic fall in the cost of acquiring information.Read More


Cryptocurrencies: Alpha and Malta

Aug 30th, 2018 | Filed under: Currencies, Digital currencies, Newly Added, Other Topics in A.I., The A.I. Industry, The Global Economy & Currencies

Malta was the first jurisdiction within the EU to develop a regulatory system for collective investment schemes that invest in cryptocurrencies. A new paper offering what it calls a “top-down analysis” of hedge funds involved with cryptos details the regulatory framework now in force in Malta, highlighting the set-up andRead More


Inaccurate News Analytics: When Robots Get Things Wrong

Aug 28th, 2018 | Filed under: Algorithmic and high-frequency trading, Business News, Equity Hedge Funds, Event-Driven Hedge Funds, Hedge Funds, Newly Added, The A.I. Industry

A new study prepared for the Federal Reserve Board looks at the use of algorithms to read and interpret financial news. While there have been a lot of studies that have looked at this topic, one unique feature of this new paper, “First to ‘Read’ the News,” is that itRead More


Hedging or Trading? Why Italian Banks Use Derivatives

Aug 23rd, 2018 | Filed under: Commodities, Credit Derivatives, Derivatives, Economics, Hedge Funds, Institutional Asset Management, Newly Added, Risk management, Risk Management & Operations, Risk Management Strategies & Processes, The A.I. Industry, The Global Economy & Currencies

A recent report by the Bank of Italy looks at why the various banks of Italy use derivatives. Specifically, the central bank of that country wanted to know: is it a matter of hedging? Or is it a matter of keeping a proprietary book? Hedge fund managers and other pursuersRead More


Liquidity: The Taxi-onomy of Supply and Demand 

Aug 13th, 2018 | Filed under: Macroeconomics, Newly Added, The Global Economy & Currencies, What about beta?

By Bill Kelly, CEO, CAIA Association The CAIA Association has partnered with AIMA to develop a series of educational papers designed to equip trustees and other fiduciaries with the proper tools to assist them in their risk oversight responsibilities. The third installment covered the use and deployment of leverage in alternative funds and we are now putting theRead More


What is Behind the Momentum Factor? Informed Trades?

Aug 5th, 2018 | Filed under: CAPM / Alpha Theory, Finance & Economics, Financial Economics Theory, Newly Added

A new paper by four U.S. scholars makes a contribution to the literature on factors and the modeling of stock prices. The paper, “An Information Factor,” proposes in essence that the momentum factor isn’t what it seems to be. Ever since the publication of a 1993 paper by Jegadeesh andRead More


The Structure of the Securities Lending Market

Aug 2nd, 2018 | Filed under: Behavioral finance, Finance & Economics, Financial Economics Theory, Macroeconomics, Newly Added, The Global Economy & Currencies

An author affiliated with the National University of Singapore and one with Goethe University Frankfurt, Germany, have co-authored a paper on the structure of the securities lending market: specifically, on the fact that this market is an oligopoly, and on the implications that has for pricing. The general outlines areRead More


Active Management, the Business Cycle, and the Silk Road

Jul 31st, 2018 | Filed under: Allocating to A.I., Alpha & Beta, Finance & Economics, Macroeconomics, Newly Added, Other Topics in A.I., Retail Investing, The Global Economy & Currencies

LPL Financial’s 2018 Forum Conference for investors took place in Boston this week, Sunday through Tuesday. This is an annual event that brings together thousands of advisors and program managers to discuss industry issues and new products. LPL is an independent broker-dealer headquartered in Boston, with offices in Fort Mill,Read More


Centralized Exchanges and Cryptocurrencies

Jul 26th, 2018 | Filed under: Commodities, Currencies, Digital currencies, Emerging Alternative Investments, Finance & Economics, Financial Economics Theory, Investing in Commodities, Newly Added, The Global Economy & Currencies

Cryptocurrencies are increasingly traded on centralized exchanges, such as Gemini and Coinbase. This fact itself has generated some resentment in the crypto world, because the very idea of  centralized exchange seems to violate the original anarchic animating spirit of the cryptocurrencies, even of “Satoshi” himself. Vitalik Buterin, who as the creatorRead More


A Counterintuitive Result on Bank Size and Too Big to Fail

Jul 22nd, 2018 | Filed under: Behavioral finance, Finance & Economics, Financial Economics Theory, Newly Added

Ten years ago, a series of bank failures rocked the financial and economic worlds. One of the immediate political consequences of those failures was the creation, by the US government, of a Troubled Asset Relief Program (TARP). This almost immediately morphed into a troubled equity relief program, because as TreasuryRead More


BarclayHedge Numbers Show Cryptocurrency Dive

Jul 19th, 2018 | Filed under: Commodities, CTA, Currencies, Digital currencies, Emerging Alternative Investments, Macro and Managed Futures Funds, Newly Added, Other Topics in A.I., The A.I. Industry, The Global Economy & Currencies

BarclayHedge says that its flash estimate for the Barclay CTA Index shows a 0.05% loss in June, and a 2% loss year to date. More remarkably, the flash estimate shows a 16.23% drop in June and a 45.43% drop YTD for the CryptoCurrency Traders Index. The founder and president ofRead More


Asset Management in China: Expect Growth

Jul 8th, 2018 | Filed under: Asset Allocation Models, Consultants, Finance & Economics, High-net-worth investors, Institutional Asset Management, Institutional Investing, Newly Added, What about beta?

A new study by Casey Quirk looks at asset management in China. It makes a bold claim: that by 2030, asset management strategies broadly defined will account for 10% of total Chinese wealth. That will be a more than doubling of the corresponding number at present: 4%. If China getsRead More


The Crypto ‘Bubble’ as Seen From Boston College

Jul 5th, 2018 | Filed under: Digital currencies, Emerging Alternative Investments, Newly Added, Other Topics in A.I., The Global Economy & Currencies

Two scholars affiliated with Boston College, Carroll School of Management, have published a study of initial coin offerings (ICOs), that has given a mixed verdict on the common contention that cryptocurrencies in general and ICOs in particular constitute a “bubble” akin to, say, 17th century tulips or the mortgage derivativesRead More


The Efficiency of the Markets in Crypto-Currencies

Jun 28th, 2018 | Filed under: Currencies, Digital currencies, Emerging Alternative Investments, Finance & Economics, Financial Economics Theory, Newly Added, The Global Economy & Currencies

Three scholars affiliated with Johns Hopkins have evaluated cryptocurrency investing, in a new paper available at SSRN, and have concluded that “near-term cryptocurrency markets are semi-strong form efficient.” That bit of finance theorist jargon means that all publicly available information gets discounted quickly into an asset’s price, so that neitherRead More


Stein’s Law and Rising Production Costs

Jun 26th, 2018 | Filed under: Business News, Commodities, Commodities, Insolvency, Investing in Commodities, Newly Added

Herbert Stein, who was President Richard Nixon’s chairman of the Counsel of Economic Advisors, is often quoted as saying, “If something cannot go on forever, it will stop.” This statement, known as “Stein’s Law,” has the right ring of profundity about it, a mixture of tautology and empirically verifiable generalization.Read More


A Talk on the What and Whys of Cryptocurrencies

Jun 20th, 2018 | Filed under: Currencies, Digital currencies, Emerging Alternative Investments, Finance & Economics, Newly Added, Other Topics in A.I., The Global Economy & Currencies

The Battle of the Quants came to New York City on Wednesday, June 20, and the CAIA Association was one of its media sponsors. Much of the event involved cryptocurrencies, including an exchange between John D’Agostino (the global head of investor engagement at DMS Governance) and Nouriel Roubini, Chairman ofRead More


Africa Still Rising (but Patience May Be Required)

Jun 12th, 2018 | Filed under: Emerging Alternative Investments, Emerging markets, High-net-worth investors, Newly Added, Other Topics in A.I., Private Equity, Private Investments, The Global Economy & Currencies

The Emerging Markets Private Equity Association, in a new report, suggests that the “Africa Rising” narrative of a few years ago is behind us. Africa is seen still as having enormous potential. But the report also says, “the commodity downturn of the last several years has had a severe impactRead More


The View from Amundi: Absolute Return and Factor Models

Jun 10th, 2018 | Filed under: CAPM / Alpha Theory, Finance & Economics, Newly Added

On May 30, CAIA France sponsored a panel discussion on absolute return strategies, held at the headquarters of Amundi Asset Management, on the Boulevard Pasteur in Paris. Frederic Hoogveld, the head of investment specialists, index and smart beta for Amundi, spoke that evening on dynamic factor allocation. As a review:Read More


AQR Makes the Case for a VRP Strategy

Jun 5th, 2018 | Filed under: Behavioral finance, Finance & Economics, Financial Economics Theory, Newly Added

AQR Capital Management, the Greenwich, CT-based global investment firm, has posted a new discussion of the volatility risk premium and of the advantages of strategies based thereon. In principle the premium would disappear if markets efficiently estimated the probability of significant losses. But it remains, because investors are risk averseRead More


Quants and Fundamentalists Unite!

May 31st, 2018 | Filed under: Algorithmic and high-frequency trading, Fees, Hedge Fund Industry Trends, Hedge Funds, Newly Added, Structure of the Hedge Funds Industry, The A.I. Industry

By standard definition, a “quantitative” investing strategy is one that selects securities using customized models, often algorithm-driven and thus on the operational level independent of human judgment. Again working from standard definitions, a “fundamental” investing strategy involves an examination of whether the entity issuing a security (corporation, sovereign, or other)Read More


Eurekahedge on Japan as an Investment Mandate

May 24th, 2018 | Filed under: Allocating to A.I., Institutional Asset Management, Institutional Investing, Macroeconomics, Newly Added, The Global Economy & Currencies

Eurekahedge has recently concluded its fifth annual survey of asset managers with mandates to invest in Japan. In the words of Eurekahedge chairman and CEO, Satoshi Iwanaga: “Survey results for 2018 suggest that central bank normalization is still a long way off in Japan, with investors continuing to reduce theirRead More


The CBOE and VIX: The Appearance of Manipulation

May 6th, 2018 | Filed under: Business News, Commodities, Finance & Economics, Newly Added

On April 23, 2018, the chairman and the president of the Chicago Board Options Exchange issued an open letter to address concerns that the CBOE Volatility Index (VIX) is subject to manipulation. There were at least two incitements behind this letter. First, its authors, Chairman Ed Tilly and President ChrisRead More


Revising the ICAPM to Reflect Effects of Style Investing

May 1st, 2018 | Filed under: CAPM / Alpha Theory, Finance & Economics, Financial Economics Theory, Newly Added

A recent paper by Michael Stutzer, of the University of Colorado at Boulder, Leeds School of Business, suggests that the intertemporal version of the capital asset pricing model (ICAPM) needs some revision in light of the market dominance of style investors. A more full statement of that might be: itRead More


Funds Use Public Info to Complement Private Signals

Apr 12th, 2018 | Filed under: CAPM / Alpha Theory, Equity Hedge Funds, Event-Driven Hedge Funds, Finance & Economics, Financial Economics Theory, Hedge Funds, Newly Added

Alan D. Crane and two colleagues have written a paper on whether and how hedge funds profit from publicly available information, in particular from SEC filings. Crane is an assistant professor at Houston’s Rice University, Jesse H. Jones Graduate School of Business. He and two Rice students, Kevin Crotty andRead More


Options-based Strategies and their Pay-offs

Apr 10th, 2018 | Filed under: Behavioral finance, Finance & Economics, Financial Economics Theory, Newly Added, Risk Management & Operations, Risk Metrics and Measurement

Roberto Obregon, of the Meketa Investment Group, has written a paper (available at SSRN) on the use of options-based equity strategies. Obregon is the author of a number of scholarly papers on alternative strategies, including one last fall on global macro, which he co-authored with Willam Dana. In his optionsRead More


Bitcoin Futures ETFs: SEC Requests Comment

Apr 8th, 2018 | Filed under: Currencies, Digital currencies, Emerging Alternative Investments, Finance & Economics, Financial Economics Theory, Newly Added, Other Topics in A.I., The Global Economy & Currencies

In December last year the NYSE Arca Inc. filed a proposed rule change that would allow for the creation of Exchange Traded Funds investing in Bitcoin futures contracts, and, potentially, in other related Financial Instruments. In January 2018 the U.S. Securities and Exchange Commission extended its review of this proposal.Read More


Finance Theory, Listed Equities, and Liquidity

Mar 29th, 2018 | Filed under: CAPM / Alpha Theory, Finance & Economics, Financial Economics Theory, Newly Added

A recent paper from Robeco discusses whether a liquidity premium exists in the stock market. The authors, David Blitz, Jean-Paul van Brakel, and Milan Vidojevic, conclude that “the evidence for such a premium is, at best, weak.” Less politely, these authors refer to the whole notion of a liquidity premiumRead More


What Makes Big Data So … Big?

Mar 22nd, 2018 | Filed under: Algorithmic and high-frequency trading, Business News, Finance & Economics, Newly Added

The term “big data” has become a cliché. One has to remind one’s self that it is a somewhat ill-fitting label. What is new about the world of data isn’t that there is a lot of it; nor that on the software end the processing of data becomes easier overRead More


Reducing Dependence on (L)IBOR

Mar 15th, 2018 | Filed under: Finance & Economics, Newly Added, Risk Management & Operations, Risk Metrics and Measurement, The Global Economy & Currencies

A creation of the mid-1980s, the London Interbank Offered rate (LIBOR) became immensely influential over the three decades that followed. It became a reference rate for both finance and commerce for the rate of nearly risk-free interest, and in the process it spawned other IBORs, including EURIBOR and Japan’s TIBOR.Read More


SCOTUS Decision Regarding Distressed Assets, Safe Harbors & Clawbacks

Mar 13th, 2018 | Filed under: Business News, Finance & Economics, Insolvency, Newly Added

The U.S. Supreme Court decision in Merit Management v. FTI Consulting may prove important to distressed asset managers, who need to know when defendants can assert the protection of the “safe harbor” provision of federal bankruptcy law, thus avoiding clawbacks. Section 546(e) of the statute says that a debtor mayRead More


The Unrecognized Risks of Short Vol Strategies

Feb 25th, 2018 | Filed under: Finance & Economics, Financial Economics Theory, Newly Added, Risk Management & Operations, Risk Metrics and Measurement

Vineer Bhansali and Lawrence Harris have written a scholarly paper on what they call the “extraordinary growth of short volatility strategies” since late 2010. A lot of people and institutions seem to have come to the conclusion that spiking volatility is just that. A “spike” on a chart is definitionallyRead More


PE and VC Opportunities in 21st Century India

Feb 13th, 2018 | Filed under: Currencies, Equity Types of Private Equity, Finance & Economics, Newly Added, Private Equity, Private Investments, The Global Economy & Currencies, Venture capital

ARA Law, a firm based in Mumbai and Bangalore, India, has issued a paper on private equity and venture capital in that country. In a foreword, firm founder Rajesh N. Begur observes that there is a positive dynamic now at work in India’s economy, one that in his view “canRead More


S&P on Reading VIX

Feb 6th, 2018 | Filed under: Finance & Economics, Financial Economics Theory, Newly Added

S&P Dow Jones Indices has put out a paper offering market participants without patience for “academic rigor” an accessible guide to the so-called “Fear Index,” the VIX, calculated from the prices of a specific basket of S&P options. The contributors to the paper are: Tim Edwards, S&P Global senior director,Read More


Muster Drill: To the Value Lifeboats

Jan 30th, 2018 | Filed under: Finance & Economics, Newly Added

By Scott Opsal While we’re not calling for an imminent market top, we are keeping a diligent watch from the crow’s nest for signs of a coming market correction. Equity investors worried that there is a bear-shaped iceberg looming somewhere in 2018 should be evaluating defensive portfolio strategies that wouldRead More


What CTAs Think about Bitcoin Futures

Jan 25th, 2018 | Filed under: Commodities, CTA, Currencies, Digital currencies, Emerging Alternative Investments, Finance & Economics, Macro and Managed Futures Funds, Newly Added, Other Topics in A.I., The Global Economy & Currencies

A new BarclayHedge study indicates that the majority of commodity trading advisers surveyed are unenthusiastic about the new Bitcoin futures. Specifically, asked “do you consider Bitcoin futures to be a valuable/useful addition to a diversified futures portfolio?” nearly three quarters (73%) said “no.” The sample for this survey included firmsRead More


Aquila Asks: Who’s Afraid of Pricey Markets?

Jan 18th, 2018 | Filed under: Commodities, Commodities: Examples, Finance & Economics, Gold, Newly Added, The Global Economy & Currencies

A new paper from Aquila Capital Group looks at managed futures, and makes the case that they offer investments tools with which one can achieve a “robust and diversifying risk/return profile.” The paper begins with the concerns many investors have at present. Record long bull markets, high asset prices, andRead More


CRYPTOCURRENCIES – HOT BUY OR HOT AIR?

Jan 17th, 2018 | Filed under: Currencies, Digital currencies, Emerging Alternative Investments, Newly Added, Other Topics in A.I., The Global Economy & Currencies

By Diane Harrison With traditional stock markets offering robust gains in 2017 and looking poised to continue their attractiveness in 2018, investors need strong persuasion to shift their equity allocations elsewhere. Enter the latest media darling: cryptocurrencies. The alternatives news feeds are awash in stories extolling the meteoric rise ofRead More


How Random is the Walk? Bond Market Empiricism

Jan 2nd, 2018 | Filed under: Behavioral finance, CAPM / Alpha Theory, Finance & Economics, Financial Economics Theory, Newly Added

A new paper, forthcoming in the Journal of Empirical Finance, looks at the corporate bond market, and looks specifically for behavioral biases. Although it finds some, it also finds that they are small, and can’t serve as the foundation for a profitable trading strategy. Though its route is roundabout, theRead More


Top 5 Alpha Stories of 2017

Dec 31st, 2017 | Filed under: Business News, Commodities, Commodities: Examples, Finance & Economics, Insolvency, Newly Added, oil, The A.I. Industry

In surveying this year for dramatic alpha-related stories, we have much whence to choose. This was the year in which the Murdoch family announced its intention to sell some of their highest value holdings to Disney. Also, in 2017 the EQT Rice merger (contested, unsuccessfully, by one prominent hedge fundRead More


State Street Forecasts on Smart Beta

Dec 12th, 2017 | Filed under: Allocating to A.I., Alpha & Beta, Finance & Economics, Institutional Asset Management, Institutional Investing, Liquid Alternative Investiments, Newly Added, Other Topics in A.I., Smart Beta

State Street Global Advisors has a new paper out that seeks to help State Street clients “refine their own strategic asset allocation” especially insofar as their portfolios include smart beta investments, by explaining how State Street forecasts returns, and where the forecasts as to some of the factor returns standRead More