Browsing: CAPM / Alpha Theory

CAPM / Alpha Theory

Bookstaber’s pre-boarding call for the “flight to simplicity”

Jan 10th, 2008 | Filed under: CAPM / Alpha Theory, Hedge Fund Regulation

Author Richard Bookstaber says you can't fight complexity with even more complexity. What is needed, he says, is a "flight to simplicity". Do they have business class on that plane? Read More


“Homemade Hedge Funds”: Delicious but deadly?

Jan 8th, 2008 | Filed under: CAPM / Alpha Theory, Alternative Beta & Hedge Fund Replication

There is a lot of talk about how hedge fund returns can be "replicated" using liquid derivatives, swaps, futures, and "exotic beta". But what about good old-fashioned ETFs? Read More


New paper explains “muted demand” for portable alpha

Jan 3rd, 2008 | Filed under: CAPM / Alpha Theory, Portable Alpha & Alpha/Beta Separation, Performance, Analytics & Metrics, Fees

When arguments can be made that 130/30 investing and portable alpha are cousins, why then has 130/30 become the cat's meow and portable alpha growth is "muted"? Two academics have a theory.Read More


More on how the ivory towers grow so tall

Dec 27th, 2007 | Filed under: CAPM / Alpha Theory

How exactly to top performing university endowments make all their money? You may be surprised by what this academic has to say on the issue.Read More


Ineichen looks back (way back) to see future

Dec 26th, 2007 | Filed under: CAPM / Alpha Theory

Looking for something a little different to read this holiday season? UBS's Alexander Ineichen continues to mix history, philosophy, literature and finance and we've got his latest thinking.Read More


The expanding (alpha) universe

Dec 23rd, 2007 | Filed under: CAPM / Alpha Theory

With the constant flow of hedge fund industry size estimates, it's easy to wonder if the hedge fund industry is going to hit a ceiling at some point. We consulted one of the experts to find out.Read More


Home of original “black swans” found to have smallest population of the statistical variety

Dec 18th, 2007 | Filed under: CAPM / Alpha Theory

New research finds statistical "black swans" - whose namesake is indigenous to Australia - are actually one step away from the endangered species list down under.Read More


Man Group CEO on lock-ups and alpha…

Dec 5th, 2007 | Filed under: CAPM / Alpha Theory

The CEO of one of the world's largest hedge fund companies told an audience yesterday that lock-ups lead to higher returns. Fair enough. But is it "alpha"? Read More


Alternative Viewpoints: “Liquidity Alpha”

Nov 27th, 2007 | Filed under: CAPM / Alpha Theory, CAIA Alternative Viewpoints

If illiquidity demands fair compensation and hedge funds are relatively illiquid, does it follow that some of what might look like "hedge fund alpha" is really just an illiquidity premium? Read More


Is there alternative beta in alternative energy?

Nov 26th, 2007 | Filed under: CAPM / Alpha Theory

Does clean energy produce alpha? When stacked up against the old-fashioned variety, it doesn't look like it (at least so far). But is "dirty energy" even an appropriate benchmark?Read More


“Chicago Beta”

Nov 6th, 2007 | Filed under: CAPM / Alpha Theory, Hedge Fund Industry Trends

Apparently, there is something in the water in Chicago - and it's not just that disgusting green dye they dump in the river on St. Patrick's Day.Read More


Is previous research on hedge fund performance persistence “biased”?

Oct 28th, 2007 | Filed under: CAPM / Alpha Theory

Return "persistence" is a pre-condition for true alpha. But this new study says hedge fund persistence is actually being measured incorrectly by many. Read More


Q-Group spring 2007 seminar summaries are (almost) all about alpha

Sep 25th, 2007 | Filed under: CAPM / Alpha Theory

The storied "Q-Group" of quant rocket scientists has recently posted the summary from its spring 2007 meetings. We find that most of its 17 pages are dedicated to alpha-centric investing.Read More


Tabb Group wins creative writing award

Sep 25th, 2007 | Filed under: CAPM / Alpha Theory

Today we are pleased to announce the winner of a new award we just made up for the most colourful executive summary in the history of alpha-centric investing.  This ditty from The Tabb Group, a consulting firm we mentioned yesterday, contains the following great lines: “Like a hot knife through butter,Read More


What August says about market neutral funds: not much

Sep 11th, 2007 | Filed under: CAPM / Alpha Theory

With the market neutral hedge fund indexes off in August, it's easy to conclude that "market neutral" funds aren't that neutral after all. But coincident poor performance doesn't say much.Read More


The Altercation over Indexation

Jul 26th, 2007 | Filed under: CAPM / Alpha Theory

Fundamental Indexing's Rob Arnott went toe-to-toe with Vanguard's Gus Sauter in a recently-released webcast. Billed as an "Indexation Smackdown", the bout featured plenty of bobbing and weaving.Read More


Sell-side not a bunch of snake-oil salesmen after all

Jul 11th, 2007 | Filed under: CAPM / Alpha Theory

Intuition suggests that sell-side analysts are destined to succomb to the conflicts of interest inherent in their business model. But a new study suggests the sell-side might not be that bad after all.Read More


“Operational Alpha”

Jun 20th, 2007 | Filed under: CAPM / Alpha Theory, Fees

As the hedge fund industry matures, mega-managers are spinning out their back-offices into separate businesses. And all of a sudden, back-office backwaters are irrigating alpha country. Read More


The Patent King of Pasadena

Jun 17th, 2007 | Filed under: CAPM / Alpha Theory

WisdonTree Investments is muscling in on "fundamental indexation" the (patented) territory of Rob Arnott's Research Affiliates. A closer look at Arnott's patents reveals he is no stranger to the US Patent Office. Read More


Celluloid Arb

Jun 13th, 2007 | Filed under: CAPM / Alpha Theory

The media has fallen for stories involving hedge funds and Hollywood in 2007. Last week saw another launch of a fund that invests in individual movies. So how do you calculate the "alpha" of a movie?Read More


A Richer Paradigm

Jun 10th, 2007 | Filed under: CAPM / Alpha Theory

Bernstein's "Capital Ideas Evolving" has a lot to say about what some have called "a whole new...richer paradigm" of investing. Read More


Porters Five Forces Applied to Hedge Funds

Jun 8th, 2007 | Filed under: CAPM / Alpha Theory, Hedge Fund Industry Trends

George Main is one such manager. Fiercely Canadian, he laments the fact that he has rarely made any allocations to Canadian hedge fund managers out of his nearly $2 billion fund of hedge funds at Diversified Global Asset Management (DGAM). Some of you might recognize George’s name from his recentRead More


So much for “double alpha”

Jun 4th, 2007 | Filed under: CAPM / Alpha Theory, 130/30

Long/short managers often say they produce alpha on the long and short sides of their portfolios. But in a world where good shorts are getting hard to find, whither "double alpha"?Read More


“Alpha”: a vexatious lexigraphic obfuscation*

May 17th, 2007 | Filed under: CAPM / Alpha Theory

The word "alpha" is now used to describe so many different forms of real and imagined out performance. It's time we came up with some new words. We've done the Greeks. How about the Aramaic alphabet? Read More


Mommy, Where do alphas come from?

May 15th, 2007 | Filed under: CAPM / Alpha Theory, Performance, Analytics & Metrics

MIT's Andrew Lo releases a new paper that introduces a new measure of alpha - the "active component". Lo argues that in truly active funds portfolio weightings are correlated to individual security returns. Read More


Fundamental indexation comes under renewed attack

May 7th, 2007 | Filed under: CAPM / Alpha Theory

Rob Arnott isn’t afraid to go against the grain.  His “fundamental indexing” methodology ignores price and value-weighted indices and instead uses fundamental business metrics such as sales and revenue to construct investment benchmarks.  He says this avoids the propensity for indices to overweight temporarily overvalued stocks and underweight temporarily undervalued stocks. ButRead More


Passive Management: ETF “dark matter”

May 1st, 2007 | Filed under: CAPM / Alpha Theory

So you think ETFs and index funds have grown a lot over he past 15 years? Check out the growth of harder-to-measure index "dark matter" hidden within all mutual funds.Read More


Downward-sloping security market line: a sign the end is nigh?

Apr 29th, 2007 | Filed under: CAPM / Alpha Theory

A new research paper by the brainiacs at Dutch institutional investment manager Robeco shows that not only don't high-vol stocks outperform low-vol stocks, but they actually underperform them.Read More


Hedge Funds “Handing Alpha” to long-term investors: UBP

Apr 23rd, 2007 | Filed under: CAPM / Alpha Theory

Tim Price, CIO of Global Strategies at UBP writes this month that hedge fund's obession with short term liquidity spells outsized returns for those with "emotional discipline".Read More


Small Cap Effect: “It’s Only a Flesh Wound!”

Apr 18th, 2007 | Filed under: CAPM / Alpha Theory

Dresdner Kleinwort’s James Montier levels an attack on Fama & French's alleged small-cap outpeformance - leaving 3F proponents taunting us with cries that “it’s only a flesh wound!”.Read More


The Value Premium: value pricing, or just a flat tire?

Apr 17th, 2007 | Filed under: CAPM / Alpha Theory

Researchers say the value factor in the Fama & French model is ill-defined and needs to be split in two, one factor for "structural" value and one for "transitory" value.Read More


Crystal ball discovered? New model forecasts manager success

Apr 15th, 2007 | Filed under: CAPM / Alpha Theory

Academics propose a new metric to measure the extent to which a manager’s performance is correlated - not with the markets - but with “public information”. Read More


Schneeweis on Alpha, the SEC and Hedge Fund Replication

Apr 11th, 2007 | Filed under: CAPM / Alpha Theory, Hedge Fund Industry Trends, Hedge Fund Regulation, Alternative Beta & Hedge Fund Replication

In this second half of AllAboutAlpha's recent interview with The Editor of the Journal of Alternative Investments, we ask Prof. Schneeweis about Alpha, hedge fund replication and the SEC.Read More


CAPM’s problem? Our quest for “status” over “wealth”.

Apr 6th, 2007 | Filed under: CAPM / Alpha Theory

Why do high beta stocks not produce the returns forcasted by the CAPM? The author of this new paper says it's because we seek not only absolute wealth, but "relative status".Read More


Focus on “Average” Mutual Fund is a Straw-man Argument: Fidelity Research Institute

Mar 20th, 2007 | Filed under: CAPM / Alpha Theory

The Right Answer to the Wrong Question: Identifying Superior Active Portfolio Management By: W.V. Harlow, Fidelity Research Institute & Keith Brown, University of Texas Published: Fourth Quarter 2006, Journal of Investment Management The search for alternative beta aims to explain some of the unexplained magic and mystery behind hedge fund management.  Once weRead More


“Accidental Alpha”

Mar 1st, 2007 | Filed under: CAPM / Alpha Theory

Will hedge funds regress towards index-like products? By: William Fung, London Business School & David Hsieh, Duke University Published: January 2007 Will hedge funds succumb to the same fate as large chunks of the mutual fund industry: commoditization through ETFs and index funds?  Merrill Lynch seemed to think so last October.  And now,Read More


Study is first to look under the hood to study hedge fund “skill”

Feb 28th, 2007 | Filed under: CAPM / Alpha Theory

How Smart are the Smart Guys?  A Unique View from Hedge Fund Stock Holdings. By: John Griffin, University of Texas & Jin Xu, Zebra Capital Management Published: August 21, 2006 Thanks go out to Mebane Faber at WorldBeta for giving us the heads up about this article.   Mebane has an interestingRead More


Bernstein Goes to Bat for “C.R.A.P.” CAPM

Feb 20th, 2007 | Filed under: CAPM / Alpha Theory

The weekly investment newsletter “Outside the Box” picks up where a previous edition left off – with James Montier’s assertion that “CAPM is CRAP“.  This week’s edition contains an interview with Peter Bernstein and James Montier conducted by Kathryn Welling.  As newsletter editor John Mauldin correctly observes, the article is “doubleRead More


“Homework” is the Only Route to True Alpha

Feb 16th, 2007 | Filed under: CAPM / Alpha Theory

Professor Harry Kat has been quoted extensively in the media and has become somewhat synonymous with hedge fund replication.  He has quickly developed a reputation for his irreverent views and his colourful commentary on the state of the hedge fund industry.  Love him or hate him, he’s got plenty of opinions to go around.  So “whoRead More