Financial Economics Theory
Strategic Note: Improved Smile-Implied Hedging
Jan 21st, 2021 | Filed under: CAPM / Alpha Theory, Financial Economics Theory, Newly Added, Risk management, Risk Metrics and Measurement, Risk Management Strategies & Processes, Finance & EconomicsA recent paper by two Canadian scholars looks to improve on the art of smile-implied option replication. Pascal Francois, of the HEC Montreal Department of Finance, and Lars Stentoft, of the University of Western Ontario, Department of Economics, begins with the observation that options can be dynamically replicated using model-freeRead More
The New Generation of Behavioral Finance
Nov 26th, 2020 | Filed under: Newly Added, Risk management, Asset allocation, Behavioral finance, Socially responsible investing, Asset Allocation Models, ESG, Economics, Risk Management Strategies & Processes, Hedge Funds, Macroeconomics, Finance & EconomicsMeir Statman, a professor of finance at Santa Clara University and a consultant to Avantis Investors, has focused his scholarly efforts for decades on behavioral finance, and those efforts have given us a recent book on the subject, Behavioral Finance: The Second Generation. In Statman’s view the first generation ofRead More
Keynes vs. Markowitz ‘Thrilla in Portfolia’
Nov 19th, 2020 | Filed under: CAPM / Alpha Theory, Financial Economics Theory, Newly Added, Risk management, Asset allocation, CAIA Alternative Viewpoints, Asset Allocation Models, Risk Management Strategies & Processes, Hedge Funds, Finance & EconomicsBy Hossein Kazemi, PhD, CFA, CAIA Association, FDP Institute, and Isenberg School of Management Introduction While Keynes vs. Markowitz is not as thrilling as Ali vs. Frazier, it has important implications for investors when selecting funds and investment managers when constructing portfolios. In this “fight,” we have in one cornerRead More
A Renewal of the Value Factor in Equities
Nov 12th, 2020 | Filed under: CAPM / Alpha Theory, Newly Added, Finance & EconomicsDavid Blitz, the head of quant research at Robeco, and Robeco researcher Matthias Hanauer have posted a commentary on the value factor. This is one of the classic Fama-French factors. It began life in 1992 as a simple “high minus low” (HML) calculation; the postulation that stocks with high book-to-marketRead More
Three Sources of Alpha: A Call for Small Manager Investment
Oct 13th, 2020 | Filed under: CAPM / Alpha Theory, Hedge Fund Strategies, CTA, Investing in Commodities, Equity Hedge Funds, Newly Added, Seeding/early-stage, Macro and Managed Futures Funds, Hedge Funds, Commodities, Finance & EconomicsBy Karl Rogers, ACE Capital Investments I recently finished a multi-strategy fund of hedge funds build for an institution where I focused on three sources of alpha: small manager, equities and commodities. Small Manager Alpha Given that “small” managers have been found to outperform their larger peers[1], why do manyRead More
The Case for Redefining the Risk-free Asset
Sep 13th, 2020 | Filed under: CAPM / Alpha Theory, Financial Economics Theory, Newly Added, Finance & EconomicsThe quantitative analysis of markets, and of the performance of fund managers, is in large part the mathematical treatment of various (often contested) metrics of risk. Let us bring two points about risk into collision. First, over more than three decades scholars have debated the “equity premium puzzle.” Why doRead More
IS DOWNSIDE RISK PRICED IN CRYPTOCURRENCY MARKET?
Aug 23rd, 2020 | Filed under: CAPM / Alpha Theory, Newly Added, Risk management, Digital currencies, Risk Management Strategies & Processes, Emerging Alternative Investments, Finance & EconomicsBy Victoria Dobrynskaya, PhD, associate professor of Finance at National Research University Higher School of Economics Looking at the whole cryptocurrency market through the prism of standard multi-factor asset-pricing models reveals that there is a significant heterogeneity in the exposure to the downside market risk across coins, and that aRead More
Is the US Stock Market Overvalued? A Back-of-the-Envelope Calculation
Aug 16th, 2020 | Filed under: Performance, Analytics & Metrics, Financial Economics Theory, Newly Added, The Global Economy & Currencies, Economics, Macroeconomics, Finance & EconomicsBy Hossein Kazemi, The CAIA Association & The Isenberg School of Management In recent weeks, hundreds of research reports and many more blogs and commentaries have discussed the current valuation of the US stock market. With the economy in a recession and corporate profits and GDP down by double digits,Read More
This May Not Be the Apocalypse After All
Aug 9th, 2020 | Filed under: Hedge Fund Industry Trends, Financial Economics Theory, Newly Added, The Global Economy & Currencies, Hedge Funds, Macroeconomics, Finance & EconomicsFrom the point of view of the alternative investment world, the dramas associated with the year 2020 may not constitute as apocalyptic a challenge or as paradigmatic a shift as is commonly thought. It may even be considered, in many respects, business as usual (aside from an occasional “murder hornet.”)Read More
Putting 2020 into Perspective: Diversification May Work Better than You Think
Aug 6th, 2020 | Filed under: CAPM / Alpha Theory, Financial Economics Theory, Newly Added, Risk management, Asset allocation, Asset Allocation Models, Alternative Investments in Context, Institutional Asset Management, Risk Management Strategies & Processes, Hedge Funds, Allocating to A.I.By Rodney Sullivan, CFA, CAIA, Executive Director, University of Virginia Darden School of Business US recessions are typically accompanied by declines in stock market returns and, of course, 2020 has been no exception. We are once again reminded that investing is not easy leaving many investors to wonder how bestRead More
Peeling Back the Wrapper of Hedge Fund Strategies
Apr 13th, 2020 | Filed under: CAPM / Alpha Theory, Hedge Fund Strategies, Alpha & Beta, Equity Hedge Funds, Newly Added, Institutional Investing, Alpha Strategies, Event-Driven Hedge Funds, CAIA Alternative Viewpoints, Liquid Alts, Institutional Asset Management, Macro and Managed Futures Funds, Hedge Funds, Relative Value Hedge Funds, Liquid Alternative Investiments, Allocating to A.I., Other Topics in A.I.By Aaron Filbeck, CAIA, CFA, CIPM, Associate Director, Content Development at CAIA Association During CAIA Association’s most recent Virtual Chapter event, Keith and I (virtually) sat down with Chris Tidmore, CFA, CPA at The Vanguard Group to discuss Vanguard’s recent whitepaper, “The Wrapper Matters: Comparing Liquid Alternatives to Hedge Funds”Read More
Taleb: What Size Tail Does the Smart Money Bet On?
Jan 28th, 2020 | Filed under: Financial Economics Theory, Newly Added, Risk management, Behavioral finance, The A.I. Industry, Risk Management Strategies & Processes, Machine Learning, Finance & Economics, Other Topics in A.I.Statistician/philosopher Nassim Nicholas Taleb critiques “behavioral” economics and finance as he looks at the differences between “binary forecasts” and “real world payoffs,” in a recent paper for the International Journal of Forecasting. Much of the argument will be familiar to those who have some acquaintance with Taleb’s work as itRead More
SHARE BUYBACKS OR COMPOSITE EQUITY ISSUANCE?
Jan 1st, 2020 | Filed under: CAPM / Alpha Theory, Financial Economics Theory, Newly Added, The Global Economy & Currencies, Emerging markets, The A.I. Industry, Institutional Asset Management, Finance & EconomicsBy Daniel Fang, CFA, CAIA, Quantitative Research, and Diana Olteanu-Veerman, CFA, Quantitative Strategy, Northern Trust Asset Management Composite Equity Issuance (Cei) Can be a Proxy for Intangible Returns Anomalies Even though factor investing is widely supported in academia and investment practice, forecasting and harvesting factor returns remains challenging for various reasons.Read More
A Critique of (Non-forensic) Short Selling
Dec 12th, 2019 | Filed under: Hedge Fund Strategies, Equity Hedge Funds, Financial Economics Theory, Newly Added, Alpha Strategies, The A.I. Industry, Hedge Funds, Finance & EconomicsIn a new paper, three quants with Robeco suggest that the “short” side of the activity of many long/short equity trades is pointless. These quants are David Blitz, Guido Baltussen, who is also affiliated with Erasmus University, Rotterdam, and Pim Van Vliet. They have broken down the common equity factorRead More
Pairs Trading Suggested for Energy Stocks
Dec 11th, 2019 | Filed under: CAPM / Alpha Theory, Hedge Fund Strategies, Alpha & Beta, Newly Added, Alpha Strategies, ETFs, The A.I. Industry, Hedge Funds, Allocating to A.I., Finance & EconomicsCarlos Salas Najera, of the New York City Data Science Academy, has tested an old idea (pairs trading) for a strategy that could be tailored to energy stocks and related ETFs. The resulting paper is “Pairs Trading and VAR Analysis Applied to Energy Stocks.” His latest paper, though, has aRead More
Central Bank Policies Put the Squeeze on Pension Funds
Dec 5th, 2019 | Filed under: Financial Economics Theory, Newly Added, Institutional Investing, The A.I. Industry, Institutional Asset Management, Finance & EconomicsAmundi-CREATE Research has offered its independent assessment on challenges now faced by the world’s pension funds, given the policies of central banks. The subject is of great significance to alternative investments managers who represent the aggressive end of many a pension fund’s portfolio. The gist of the report is thatRead More
Past performance guarantees no future results
Oct 17th, 2019 | Filed under: Algorithmic and high-frequency trading, Financial Economics Theory, Newly Added, Risk management, Business News, The A.I. Industry, Risk Management Strategies & Processes, Finance & EconomicsSince, as everyone says, “past performance is no guarantee of future results,” a history of close correlation between two assets, or between a single asset and a benchmark, is no guarantee of future correlation. The threat that a correlation upon which a particular investor has relied will cease to applyRead More
The Persistence of the Low-Risk Effect
Oct 10th, 2019 | Filed under: CAPM / Alpha Theory, Hedge Fund Strategies, Financial Economics Theory, Newly Added, Alpha Strategies, The A.I. Industry, Hedge Funds, Finance & EconomicsThe “volatility effect,” also known as the “low-risk effect,” is the subject of a new paper from Robeco. The gist of the “effect” is this: low-risk stocks “should” show a lesser return than high-risk stocks. The Capital Asset Pricing Model predicts a linear relationship between the risk of a securityRead More
What Hedge Funds Do When the Lights Go Out
Aug 13th, 2019 | Filed under: CAPM / Alpha Theory, Equity Hedge Funds, Financial Economics Theory, Newly Added, The A.I. Industry, Hedge Funds, Finance & EconomicsA new paper looks at how hedge funds adjust their information acquisition and trading behavior as analyst coverage changes—and more specifically, when certain stocks cease to be covered by certain analysts. These authors considered the hypothesis that, faced with a murkier environment, hedge funds might become more cautious, reducing theirRead More
The Verdict Is In: It’s a Soft Landing for the Global Economy
Aug 1st, 2019 | Filed under: Financial Economics Theory, Newly Added, The Global Economy & Currencies, Economics, The A.I. Industry, Macroeconomics, Finance & EconomicsNeuberger Berman has long pressed the investment thesis that the prolonged recovery from the depths of the Global Financial Crisis would end, when it ended, with a “soft landing.” There will be a slowing of growth, and with that an increase in volatility, but it need not involve a “hard”Read More
Active Risk Budgeting Gets Consistent Alpha
Jul 28th, 2019 | Filed under: CAPM / Alpha Theory, Financial Economics Theory, Newly Added, Risk management, Risk Metrics and Measurement, The A.I. Industry, Risk Management Strategies & Processes, Risk Management & Operations, Finance & EconomicsA new paper takes an experimental look at “Active Risk Budgeting,” a method of portfolio construction that looks to build upon older and sometimes passive risk budgeting approaches, adding enough active management to allow the risk budget to change over time. For example, an institution might want its risk budgetRead More
Bayesian Probability Theory and a Hierarchical Learning Portfolio
Mar 19th, 2019 | Filed under: Algorithmic and high-frequency trading, Financial Economics Theory, Newly Added, The Global Economy & Currencies, Business News, The A.I. Industry, Finance & EconomicsTwo scholars working with Bayesian probability theory recently published a fascinating discussion of market timing and portfolio efficiency. They have proposed what they call a “hierarchical ensemble learning portfolio.” Yes, that sounds rather heavy on the jargon. We’ll break it down a bit in what follows. The authors of theRead More
Alpha: The Rise of the Middle Class in Emerging Markets
Feb 21st, 2019 | Filed under: Investing in Commodities, Financial Economics Theory, Newly Added, The Global Economy & Currencies, Emerging markets, The A.I. Industry, Commodities, Finance & EconomicsA new paper from State Street Global Advisors takes a sociological approach to the search for alpha in emerging market nations. It contends that the “major theme for growth” in the emerging markets moving forward will be “based on the rise of the middle class and rising consumption in theseRead More
Smart Beta and Tail Events
Feb 5th, 2019 | Filed under: Financial Economics Theory, Newly Added, Business News, Smart Beta, The A.I. Industry, Liquid Alternative Investiments, Finance & Economics, Other Topics in A.I.A sound “portfolio optimization strategy” is one that takes into consideration how its assets are behaving in the bad times, those that represent the left-side tail of the bell curve. This is not all that novel an idea, but Maria Kartsakli and Felix Schlumpf, Zurich Insurance Company executives, give itRead More
Who Cares What Employees Think? Hedge Funds, That’s Who
Feb 3rd, 2019 | Filed under: Equity Hedge Funds, Newly Added, Behavioral finance, The A.I. Industry, Hedge Funds, Finance & EconomicsThe bosses of a publicly listed company had better care what their employees think about their company, because “Mr. Market” cares. That is one natural inference from a new paper by Jinfei Sheng, of the Paul Merage School of Business, University of California, Irvine, who looks at how the opinionsRead More
How Bayesians Solve the Markowitz Problem
Jan 13th, 2019 | Filed under: CAPM / Alpha Theory, Financial Economics Theory, Newly Added, Behavioral finance, The Global Economy & Currencies, Macroeconomics, Finance & EconomicsUnderstanding of the “Markowitz problem” has changed in the 60+ years since Harry Markowitz’ publication of an article in the Journal of Finance that outlined the basics of modern portfolio theory. The problem is that portfolio theory requires an investor to estimate risk, return, and correlation from market data, meaningRead More
‘Great Moderation?’ Forget about it, says new Fed working paper
Jan 10th, 2019 | Filed under: Financial Economics Theory, Newly Added, The Global Economy & Currencies, Economics, The A.I. Industry, Macroeconomics, Finance & EconomicsA new working paper from the Federal Reserve Bank of Chicago looks at the real risk-free interest rate over the last 30 years, where it has been trending, and why that trend hasn’t had the consequences one might intuitively have predicted. The paper, Accounting for Macro-Finance Trends, is the workRead More
Altman: 30 Years of Distressed Debt Strategies
Nov 8th, 2018 | Filed under: Hedge Fund Strategies, Debt Types of Private Equity, Financial Economics Theory, Newly Added, The A.I. Industry, Hedge Funds, Private Investments, Finance & EconomicsIn the late 1980s, the chairman of The Foothill Group approached Edward I. Altman, already then well known for the creation of the Z-score used for predicting bankruptcy. The chairman asked Altman to develop a descriptive and analytical white paper on distressed debt. He obliged, writing first a paper onRead More
50 Years of Put-Call Parity
Nov 1st, 2018 | Filed under: CAPM / Alpha Theory, Financial Economics Theory, Newly Added, The A.I. Industry, Finance & EconomicsIt will be 50 years ago next year (1969) that Hans R. Stoll came out with “The Relationship between Put and Call Option Prices,” establishing the principle of put-call parity. Stoll’s article in The Journal of Finance was a landmark in the developing scholarship about derivatives. It preceded the workRead More
The Trinity Of Errors In Financial Models: An Introductory Analysis
Oct 24th, 2018 | Filed under: Financial Economics Theory, Newly Added, The A.I. Industry, Macroeconomics, Finance & EconomicsBy Deepak Kanungo, Founder and CEO of Hedged Capital LLC In this introductory article, we explore three types of errors inherent in all financial models. We examine these errors using a simple probabilistic model that can be used for predicting the federal funds rate, an interest rate of seminal importanceRead More
Shariah Finance, Volatility, Clientele Effects
Oct 23rd, 2018 | Filed under: Financial Economics Theory, Newly Added, The Global Economy & Currencies, Emerging markets, The A.I. Industry, Frontier markets, Finance & EconomicsTwo recent scholarly papers take distinctive looks at the sukuk market in Malaysia. Accordingly, each contributes to the ongoing discussions and evaluations of the place of Islamic finance within the broader global (and alpha-seeking) picture. Sukuk are bond-like instruments structured to pay profit, not interest, that are sold chiefly toRead More
A Brief History of Asset Allocation
Oct 16th, 2018 | Filed under: CAPM / Alpha Theory, Algorithmic and high-frequency trading, Hedge Fund Strategies, Financial Economics Theory, Newly Added, Risk management, Crowdfunding, Risk Metrics and Measurement, Business News, The A.I. Industry, Risk Management Strategies & Processes, Hedge Funds, Emerging Alternative Investments, Finance & Economics, Other Topics in A.I.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
Peeling the Onion of Equity Hedge Fund Alpha
Oct 4th, 2018 | Filed under: CAPM / Alpha Theory, Hedge Fund Strategies, Equity Hedge Funds, Financial Economics Theory, Newly Added, The A.I. Industry, Hedge Funds, Finance & EconomicsThe 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
Oil Trading and Round Number Effects
Sep 13th, 2018 | Filed under: Investing in Commodities, Financial Economics Theory, Newly Added, Behavioral finance, oil, Commodities: Examples, The A.I. Industry, Commodities, Finance & EconomicsThe “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
What is Behind the Momentum Factor? Informed Trades?
Aug 5th, 2018 | Filed under: CAPM / Alpha Theory, Financial Economics Theory, Newly Added, Finance & EconomicsA 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: Financial Economics Theory, Newly Added, Behavioral finance, The Global Economy & Currencies, Macroeconomics, Finance & EconomicsAn 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
Centralized Exchanges and Cryptocurrencies
Jul 26th, 2018 | Filed under: Currencies, Investing in Commodities, Financial Economics Theory, Newly Added, The Global Economy & Currencies, Digital currencies, Commodities, Emerging Alternative Investments, Finance & EconomicsCryptocurrencies 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: Financial Economics Theory, Newly Added, Behavioral finance, Finance & EconomicsTen 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
The Efficiency of the Markets in Crypto-Currencies
Jun 28th, 2018 | Filed under: Currencies, Financial Economics Theory, Newly Added, The Global Economy & Currencies, Digital currencies, Emerging Alternative Investments, Finance & EconomicsThree 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
The View from Amundi: Absolute Return and Factor Models
Jun 10th, 2018 | Filed under: CAPM / Alpha Theory, Newly Added, Finance & EconomicsOn 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: Financial Economics Theory, Newly Added, Behavioral finance, Finance & EconomicsAQR 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
Revising the ICAPM to Reflect Effects of Style Investing
May 1st, 2018 | Filed under: CAPM / Alpha Theory, Financial Economics Theory, Newly Added, Finance & EconomicsA 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, Financial Economics Theory, Newly Added, Event-Driven Hedge Funds, Hedge Funds, Finance & EconomicsAlan 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: Financial Economics Theory, Newly Added, Behavioral finance, Risk Metrics and Measurement, Risk Management & Operations, Finance & EconomicsRoberto 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, Financial Economics Theory, Newly Added, The Global Economy & Currencies, Digital currencies, Emerging Alternative Investments, 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: CAPM / Alpha Theory, Financial Economics Theory, Newly Added, Finance & EconomicsA 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
The Unrecognized Risks of Short Vol Strategies
Feb 25th, 2018 | Filed under: Financial Economics Theory, Newly Added, Risk Metrics and Measurement, Risk Management & Operations, Finance & EconomicsVineer 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
S&P on Reading VIX
Feb 6th, 2018 | Filed under: Financial Economics Theory, Newly Added, Finance & EconomicsS&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
How Random is the Walk? Bond Market Empiricism
Jan 2nd, 2018 | Filed under: CAPM / Alpha Theory, Financial Economics Theory, Newly Added, Behavioral finance, Finance & EconomicsA 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
Lazard Research on Smart Beta
Nov 5th, 2017 | Filed under: Due Diligence Process, Financial Economics Theory, Newly Added, 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