Volume 16, No. 1, 2018 Portfolio Construction, Measurement, and Efficiency Essays in Honor of Jack Treynor By John B. Guerard (Review by Savannah Smith) View PDF… Read more
Archives
Carbon Footprint and Productivity: Does the “E” in ESG Capture Efficiency
Volume 16, No. 1, 2018 Gerald T. Garvey, Mohanaraman Iyer and Joanna Nash This paper analyses the now-popular carbon ratio (emissions relative to sales) as a way to select stocks. We document that reduced carbon ratios are associated with stronger future profitability and positive stock returns in a global universe of stocks. But why? The… Read more
A Blueprint for Integrating ESG into Equity Portfolios
Volume 16, No. 1, 2018 Jennifer Bender, Todd Bridges, Chen He, Anna Lester and Xiaole Sun Environmental, social and governance (ESG) offers a source of new and potentially valuable information for investors, impacting both potential returns and risk. Growing data availability has created the opportunity to integrate ESG into equity portfolios for a variety of… Read more
Establishing ESG as Risk Premia
Volume 16, No. 1, 2018 Julia L. Pollard, Matthew W. Sherwood and Ryan Grad Klobus This seminal research provides statistically significant evidence for the empirical identification of Environmental, Social and Governance (ESG) as a factor of risk premium when integrated within an equity portfolio. This study purposes to establish that the conceptual development, adoption and… Read more
Environmental, Social, and Governance Criteria: Why Investors Should Care
Ravi Jagannathan, Ashwin Ravikumar and Marco Sammon Volume 16, No. 1, 2018 We argue that even money managers who care only about risks and returns are likely to benefit from incorporating Environmental, Social, and Governance (ESG) criteria into their investment process. ESG-related issues can cause sudden regulatory changes and shifts in consumer tastes, resulting in… Read more
Assessing Risk Through Environmental, Social and Governance Exposures
Vol. 16, No 1, 2018 Jeff Dunn, Shaun Fitzgibbons and Lukasz Pomorski We discuss risk and return implications of incorporating environmental, social and governance (ESG) considerations in an investment strategy and argue that ESG exposures may be informative about the risks of individual firms. We show empirically that stocks with worst ESG exposures have volatility… Read more
Practitioner’s Digest
Volume 15, Number 4, 2017 View PDF… Read more
Machine Learning in Finance: The Case of Deep Learning for Option Pricing
Volume 15, Number 4, 2017 Robert Culkin and Sanjiv R. Das View PDF… Read more
Behavioral Risk Management: Managing the Psychology that Drives Decisions and Influences Operational Risk
Volume 15, Number 4, 2017 By Hersh Shefrin, Reviewed by Cel Kulasekaran View PDF… Read more
Pricing for Survival in the Biopharma Industry: A Case Study of Acthar Gel and Questcor Pharmaceuticals
Volume 15, Number 4, 2017 Terence C. Burnham, Samuel Huang and Andrew W. Lo Recent cases of aggressive pricing behavior in the biopharmaceutical industry have raised serious concerns among payers and policymakers about industry ethics. However, these cases should not be confused with price increases motivated by challenging business conditions that ultimately lead to greater… Read more
The Impact of Costs on Recent Target Date Fund Performance
Volume 15, Number 4, 2017 C. Edward Chang, Thomas M. Krueger and Mark A. Wrolstad Target date funds (TDFs) are rapidly becoming a common means to prepare for retirement. Given the swelling demand for these funds, this research is a timely look at TDFs’ most recent decade. As of March 2016, 518 TDFs have been… Read more
Investment Horizon Risk and Volatility Metrics
Volume 15, Number 4, 2017 Robert Korkie We re-examine the literatures’ disparate conclusions that stock returns are more (less) volatile over longer investment horizons. We claim that the commonly employed variance ratio is incapable of generally determining whether investment risk increases with investment horizon. We demonstrate that the use of effective returns and standard deviation… Read more
A Portfolio Strategy with Hedge Funds and Liquid Alternatives
Volume 15, Number 4, 2017 E. William Stone and Paul J. White The advent of liquid alternatives in mutual fund format in recent years has brought with it challenges and opportunities with regards to portfolio strategy. Interpretation of these vehicles as return enhancers or risk diversifiers can lead to very different approaches in portfolio construction… Read more
How to Calibrate the Risk of Buyout Investments? Through Buyout-Backed Initial Public Offerings
Volume 15, Number 4, 2017 Jean-François L’Her, Ram Karthik and Stéphanie Desrosiers This paper proposes to use the public market returns of buyout-backed initial public offerings (BO-backed IPOs) as a proxy for buyout funds’ appraisal-based returns. Because they provide an economically significant route to exit, and their leverage and fund ownership are still significant three… Read more
Case Study – Portfolio Manager Selection
Volume 15 , Number 3, 2017 Michael Christensen View PDF… Read more
Book Review – The Index Revolution –Why Investors Should Join it Now
Volume 15 , Number 3, 2017 The Index Revolution –Why Investors Should Join it Now by Charles Ellis. Reviewed by Javier Estrada. View PDF… Read more
Practitioner’s Digest
Volume 15, Number 3, Third Quarter 2017 View PDF… Read more
Multi-Period Portfolio Rebalancing with Personal Tax
Volume 15, Number 3, 2017 Ganlin Xu This paper compares two heuristic rebalancing rules for taxable accounts. The first one is trading X percent annually. The second one is based on the result of recent research, which indicate there existence of no-trading zone. The no-trading zone is obtained by using a quadratic function to approximate… Read more
Market Timing: Sin a Little Resolving the Valuation Timing Puzzle
Volume 15, Number 3, 2017 Cliff Asness, Antti Ilmanen and Thomas Maloney Successful market timing is a tantalizing holy grail for investors, especially when there seems to be persuasive evidence that simple valuation measures can predict subsequent market performance. But, as both researchers and investors have discovered, outperforming a passive buy-and-hold approach is harder than… Read more
What is Value in an Equity Market?
Volume 15, Number 3, 2017 Michael Suen, Hany Guirguis, Stan Beckers and Ted Theodore What is value in an equity market? Among investors, there is no universally accepted definition. This paper constructs a value index for the US equity market using the Stock and Watson (1988, 1991) methodology. The new value index is derived from… Read more
Measuring Portfolio Performance: Sharpe, Alpha, or the Geometric Mean?
Moshe Levy Vol. 15, No. 3, 2017 The most popular portfolio performance measures are the Sharpe ratio and alpha. While the Sharpe ratio is optimal under the capital asset pricing model (CAPM) assumptions of normal return distributions and unlimited borrowing at the risk-free rate, we find that it is not well aligned with investors’ preferences… Read more
The Legacy of Jack Treynor: Friends Reflect
Stephen Foerster JOIM Conference Series, March 2017 / San Diego View PDF… Read more
In Memory of Stephen A. Ross
Volume 15, Number 2, 2017 Stephen Foerster JOIM Conference Series, March 2017 / San Diego View PDF… Read more
Case Study – The Rational Investor
Volume 15, Number 2, 2017 Craig French View PDF… Read more
Book Review – Book of Value: The Fine Art of Investing Wisely 2016
Volume 15, Number 2, 2017 Book of Value: The Fine Art of Investing Wisely 2016 by Anurag Sharma Reviewed by Bruce Grantier View PDF… Read more