Vol. 20, No. 1, 2022 by Nicholas Apergis, Thomas Poufinas, Alexandros Panagakis and Ioannis Ritsios Institutional investors are investigating systematic, rule-based investment directions other than purely passive investing, such as factor-based investing. This study examines how well the factor-ETFs capture the Fama–French factors and attempts to explain their difference from the smart beta indexes applied… Read more
the JOIM
Measuring the Economic and Academic Impact of Philanthropic Funding: The Breast Cancer Research Foundation
Vol. 20, No. 1, 2022 by Detelina Vasileva, Larry Norton, Marc Hurlbert and Andrew W. Lo Using survey data gathered from grantees of the nonprofit Breast Cancer Research Foundation (BCRF), we investigated the commercial and non-commercial impacts of their research funding. We found significant impact in both domains. Commercially, 19.5% of BCRF grantees filed patents… Read more
Characteristic-Based Returns: Alpha or Smart Beta?
Vol. 20, No. 1, 2022 by Soohun Kim, Robert A. Korajczyk and Andreas Neuhierl We propose new methodology to construct arbitrage portfolios by utilizing information contained in firm characteristics for both abnormal returns and betas (and, therefore, smart-beta risk premiums). Our methodology gives maximal weight to risk-based interpretations of characteristics’predictive power before any attribution to… Read more
Relevance
Vol. 20, No. 1, 2022 by Megan Czasonis, Mark Kritzman and David Turkington The authors describe a new statistical method for improving forecasting called relevance. They describe their new method from both a conceptual and mathematical perspective, and they show how relevance links regressions to event studies and machine learning algorithms… Read more
Practitioner’s Digest
Vol. 19, No. 4, 2021 Practitioner’s Digest View PDF… Read more
Are We at the Inflection Point of Climate Investing?
Vol. 19, No. 4, 2021 Yu (Ben) Meng Just as the ongoing pandemic demonstrates our vulnerability to the invisible hand of the COVID-19 virus molecule, the extreme climate events are constant reminders of our vulnerability to another molecule, carbon dioxide. As a result, all walks of society are asking for solutions, especially ones that involve… Read more
Good States, Bad States: What Do Options Tell Us About Schizophrenic Behavior of Mr. Market and What Can We Do About It?
Vol. 19, No. 4, 2021 Vineer Bhansali and Jeremie Holdom Option prices theoretically encapsulate participants’ expectations about good state (bullish) and bad state (bearish) market outcomes. By using a mixture of distributions and reasonable assumptions, the authors extract time series of expected returns, volatilities, and mixture probabilities of these outcomes surrounding the current US elections… Read more
Book Review: Trading at the Speed of Light: How Ultrafast Algorithms are Transforming Financial Markets
Vol. 19, No. 4, 2021 By Donald Mackenzie (Reviewed by Hanbin Im) View PDF… Read more
How Do Factor Premia Vary Over Time? A Century of Evidence
Vol. 19, No. 4, 2021 Antti Ilmanen, Ronen Israel, Rachel Lee, Tobias J. Moskowitz and Ashwin Thapar Evaluating how factor premia vary over time and across asset classes is challenging due to limited time series data, especially outside of US equities. We examine four prominent factors across six asset classes over a century. We find… Read more
The U.S. Treasury Term Structure and the Distribution of Real GDP Growth
Vol. 19, No. 4, 2021 J. Benson Durham Narrowing at the front but not the long end of the yield curve, notably in both expected rates and term premiums, forecasts lower mean real GDP growth and widens the distribution. But despite undue emphasis among some practitioners and the popular press on outright inversion and recession… Read more