Browsing: Finance & Economics

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Finance & Economics

Centralized Exchanges and Cryptocurrencies

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

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: Newly Added, Financial Economics Theory, Behavioral finance, Finance & Economics

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

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: Newly Added, What about beta?, Consultants, Institutional Investing, High-net-worth investors, Asset Allocation Models, Institutional Asset Management, Finance & Economics

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: Newly Added, Emerging Alternative Investments, The Global Economy & Currencies, Digital currencies, Other Topics in A.I.

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: Newly Added, Currencies, Financial Economics Theory, Emerging Alternative Investments, The Global Economy & Currencies, Digital currencies, Finance & Economics

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: Newly Added, Commodities, Investing in Commodities, Insolvency, Commodities, Business News

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: Newly Added, Currencies, Emerging Alternative Investments, The Global Economy & Currencies, Digital currencies, Finance & Economics, Other Topics in A.I.

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: Newly Added, Private Equity, Emerging Alternative Investments, The Global Economy & Currencies, High-net-worth investors, Emerging markets, Private Investments, Other Topics in A.I.

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: Newly Added, CAPM / Alpha Theory, Finance & Economics

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: Newly Added, Financial Economics Theory, Behavioral finance, Finance & Economics

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: Newly Added, Hedge Fund Industry Trends, Algorithmic and high-frequency trading, The A.I. Industry, Hedge Funds, Fees, Structure of the Hedge Funds 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: Newly Added, Institutional Investing, The Global Economy & Currencies, Institutional Asset Management, Macroeconomics, Allocating to A.I.

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: Newly Added, Commodities, Business News, Finance & Economics

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: Newly Added, CAPM / Alpha Theory, Financial Economics Theory, Finance & Economics

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: Newly Added, CAPM / Alpha Theory, Equity Hedge Funds, Financial Economics Theory, Hedge Funds, Event-Driven Hedge Funds, Finance & Economics

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: Newly Added, Financial Economics Theory, Behavioral finance, Risk Metrics and Measurement, Risk Management & Operations, Finance & Economics

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: Newly Added, Currencies, Financial Economics Theory, Emerging Alternative Investments, The Global Economy & Currencies, Digital currencies, Finance & Economics, Other Topics in A.I.

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: Newly Added, CAPM / Alpha Theory, Financial Economics Theory, Finance & Economics

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: Newly Added, Algorithmic and high-frequency trading, Business News, Finance & Economics

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: Newly Added, The Global Economy & Currencies, Risk Metrics and Measurement, Risk Management & Operations, Finance & Economics

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: Newly Added, Insolvency, Business News, Finance & Economics

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: Newly Added, Financial Economics Theory, Risk Metrics and Measurement, Risk Management & Operations, Finance & Economics

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: Newly Added, Private Equity, Currencies, Venture capital, Equity Types of Private Equity, The Global Economy & Currencies, Private Investments, Finance & Economics

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: Newly Added, Financial Economics Theory, Finance & Economics

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: Newly Added, Finance & Economics

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

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: Newly Added, The Global Economy & Currencies, Commodities, Commodities: Examples, Gold, Finance & Economics

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: Newly Added, Currencies, Emerging Alternative Investments, The Global Economy & Currencies, Digital currencies, Other Topics in A.I.

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: Newly Added, CAPM / Alpha Theory, Financial Economics Theory, Behavioral finance, Finance & Economics

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: Newly Added, The A.I. Industry, Insolvency, oil, Commodities, Business News, Commodities: Examples, Finance & Economics

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: Newly Added, Alpha & Beta, Liquid Alternative Investiments, Institutional Investing, Smart Beta, Institutional Asset Management, Allocating to A.I., Finance & Economics, Other Topics in A.I.

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


Deloitte on Initial Coins Offerings (ICOs) as IPOs

Dec 10th, 2017 | Filed under: Newly Added, Currencies, Emerging Alternative Investments, The Global Economy & Currencies, Digital currencies, Other Issues in Private Investments, Private Investments, Other Topics in A.I.

An October 2017 white paper from Deloitte discusses the extent to which the offerings of tokens built upon blockchains have become the new IPOs of the crypto era. There are no binding rules about how to execute an initial coin offering (ICO). Nonetheless, there have been enough of these soRead More


Regulatory Challenges Posed by Crypto Funds

Dec 5th, 2017 | Filed under: Newly Added, Currencies, Hedge Funds, Emerging Alternative Investments, The Global Economy & Currencies, Digital currencies, Commodities, Finance & Economics

A forthcoming paper in the Stanford Journal of Law, Business, and Finance looks at the cryptocurrency markets (bitcoin and its kin), the hedge funds that look to make money from them and the operational issues involved. Two independent scholars collaborated on writing the paper: Edmund Mokhtarian and Alexander Lindgren. AlthoughRead More


Artificial Intelligence and Productivity: NBER Takes a Look

Nov 21st, 2017 | Filed under: Newly Added, The Global Economy & Currencies, Business News, Macroeconomics, Finance & Economics

A new working paper from the National Bureau of Economic Research, in Cambridge, Mass., discusses what its authors see as a paradox: although artificial intelligence has made astonishing advances in the last 20 years, taking along with it related technologies and stock prices, real income has stagnated, and productivity seemsRead More


Amato on the Late-Cycle Dilemma

Nov 16th, 2017 | Filed under: Newly Added, Personalities in AI, Business News, Other Topics in A.I.

Joseph V. Amato, president of Neuberger Berman Group LLC and Chief Investment Officer – Equities at Neuberger Berman, has written a thoughtful discussion of late about where the markets, and the business cycle, stands. This, the end of 2017, is a “late cycle” moment. Equities continue to rise, but theRead More


4 Lessons from the EQT Proxy Context

Nov 14th, 2017 | Filed under: Newly Added, Equity Hedge Funds, Hedge Funds, Event-Driven Hedge Funds, Business News, Finance & Economics

D.E. Shaw & Co., a hedge fund manager with an activist strategy and with about 4% of the equity in EQT Corp., said on September 14 that it thought the then-pending acquisition of Rice Energy Inc (RICE) by EQT should be contingent on two commitments: first, that EQT would mergeRead More


Algorithmic Traders: Proprietary, Agency, Liquidity

Nov 9th, 2017 | Filed under: Newly Added, Algorithmic and high-frequency trading, Business News, Finance & Economics

Two scholars affiliated with the Indian Institute of Management, in Calcutta, have posted a paper about the effects of algorithmic trading on liquidity. This paper, by Samarpan Nawn and Ashok Banerjee, based on the first chapter of Nawn’s Ph.D. dissertation, distinguishes sharply between proprietary algorithmic traders and agency algorithmic traders,Read More


Lazard Research on Smart Beta

Nov 5th, 2017 | Filed under: Newly Added, Due Diligence Process, Financial Economics Theory, Behavioral finance, Smart Beta, Risk Management & Operations, Finance & Economics, Other Topics in A.I.

Jason Williams, senior vice president at Lazard Asset Management, has written a white paper on the “six sins of smart beta.” First: what is smart beta? Academic studies indicate anomalies in the markets that somehow don’t get arbitraged away.  These become identified as “factors” and indexes can be designed soRead More


Federal Reserve on Counterparties to the next Lehman Brothers

Nov 2nd, 2017 | Filed under: Newly Added, Service Providers, Insolvency, Operations, Business News, Risk Management & Operations

The Federal Reserve has issued a final rule relating to the qualified financial contracts (QFCs) of global systemically important U.S. banking institutions (GSIBs). Derivatives & Repo Report, a blog maintained by the international law firm Perkins Coie, has done a thorough write-up on the subject, to which the material belowRead More


FACTOR RETURNS: SMALL VS. LARGE CAPS

Nov 1st, 2017 | Filed under: Newly Added, Finance & Economics, Other Topics in A.I.

By Nicolas Rabener, FactorResearch Are Factor Returns Limited to Small Caps? Summary: A frequent criticism of factor investing is that factor returns are stronger in small caps; Our research highlights that this is not uniformly true across factors; and Value and Size benefit most from including small caps. INTRODUCTION FactorRead More


Are Clearinghouses Systemically Risky? Gary Cohn is Heard From

Oct 31st, 2017 | Filed under: Newly Added, Insolvency, Hedge Funds, Business News, Structure of the Hedge Funds Industry

Economists sometimes cite a “law of unintended consequences.” This is what it sounds like, the principle that actions of people, inclusive of and perhaps (depending on who is writing) especially the actions of a government, have unanticipated and (as far as third party observers can judge intentions) unintended consequences. InRead More


China and a Reduced Form Bayesian VAR

Oct 29th, 2017 | Filed under: Newly Added, The Global Economy & Currencies, Commodities, Finance & Economics

What the heck does the forbidding phrase “reduced form Bayesian VAR” mean? Let’s break this down. The VAR in question isn’t VaR (Value at Risk). It’s Vector Autoregression. This is a stochastic process model employed to understand the linear dependences among multiple time series. Each variable in a VAR hasRead More


International Debt Enforcement: Nautical Twists and Turns

Oct 17th, 2017 | Filed under: Newly Added, Insolvency, Business News, Finance & Economics

Since sovereign debts and collection issues we shall always have with us, it is not amiss to look back four years to a decision by the Supreme Court of Ghana issued in June 2013, on NML Capital’s effort to enforce its judgment against the Republic of Argentina through the seizureRead More


AIMA and SGPS on Managed Futures and CTAs

Sep 28th, 2017 | Filed under: Newly Added, Algorithmic and high-frequency trading, CTA, The A.I. Industry, Investing in Commodities, Commodities, Business News, Institutional Asset Management, Macro and Managed Futures Funds, Allocating to A.I.

The Alternative Investment Management Association and Societe Generale Prime Services have together put out a white paper about managed futures funds and the commodity trading advisers who manage them. A key themes of the paper is that managed futures strategies aren’t as risky as are typical investments in equity markets.Read More


Aon: Alternative Risk Premia Viable for Many

Sep 17th, 2017 | Filed under: Newly Added, Alpha & Beta, Financial Economics Theory, Asset Allocation Models, Allocating to A.I., Finance & Economics

A new report from Aon discusses the contemporary market for alternative risk premia: where it is, how it got here; where it may be headed. The authors, Matthew Towsey and Chris Walvoord, begin with some very basic considerations of what ‘risk premia’ are. They are, on the one hand, theRead More


The Consequences of Auditing the Auditors

Sep 6th, 2017 | Filed under: Newly Added, Behavioral finance, Finance & Economics

Nemit Shroff, an associate professor of accounting at the Massachusetts Institute of Technology, Sloan School of Management, has written a study of the consequences of auditing for the auditees. He has concluded that the Public Company Accounting Oversight Board (PCAOB) “adds significant value to the financial reporting process,” with aRead More


High-Frequency Trading and Spoofing   

Aug 31st, 2017 | Filed under: Newly Added, Algorithmic and high-frequency trading, Investing in Commodities, Commodities, Business News, Risk Management & Operations

Six years ago Michael Coscia placed orders through the CME Group’s Globex platform via a trading algorithm that amounted to “spoofing.” He placed both large and small orders in the copper market, for example, with the large orders (cancelled within milliseconds) designed to create the illusion of market movement inRead More


Jacobs, Levy, and Markowitz on Portfolios

Aug 22nd, 2017 | Filed under: Newly Added, CAPM / Alpha Theory, Financial Economics Theory, Finance & Economics

Bruce Jacobs and Kenneth Levy, the founders and Chief Investment Officers of Jacobs Levy Equity Management, have brought out a new and considerably thickened edition of their classic collection of articles on equity investment. This second edition of Equity Management contains all 15 articles from the original, and 24 ofRead More


Networks, Modeling, and Funds of Funds

Aug 8th, 2017 | Filed under: Newly Added, The A.I. Industry, Financial Economics Theory, Alternative Investments in Context, Finance & Economics

Two scholars affiliated with FERI Trust, a leading investment manager of the German-speaking countries of Europe, have written a study of hedge fund strategies that uses a “network-based analysis” thereof. The two authors, Eduard Baitinger and Thomas Maier, argue that hedge fund strategies show “numerous network-based properties” which help explainRead More