Volume 13, Number 1, First Quarter 2015 Jack L. Treynor View PDF… Read more
Archives
INSIGHTS: Investment, Financial System, Real Output and Macro-Risk Management
Volume 13, Number 1, First Quarter 2015 Thomas S. Y. Ho and Sang Bin Lee Loan underwriting standards and quantitative easing are examples of macro-risk management tools that affect the financial sector, which in turn affects real sector outputs. And therefore asset returns, real sector outputs, financial sector, and macro-risk management are interrelated. This paper… Read more
BOOK REVIEW: Asset Management: A Systematic Approach to Factor Investing
Volume 13, Number 1, First Quarter 2015 Asset Management: A Systematic Approach to Factor Investing Andrew Ang Reviewed by Bruce Grantier View PDF… Read more
Momentum, Acceleration, and Reversal
Volume 13, Number 1, First Quarter 2015 James X. Xiong and Roger G. Ibbotson This paper studies the impact of accelerated stock price increases on future performance. Accelerated stock price increases are a strong contributor to both poor future performance and a higher probability of reversals. It implies that accelerated growth is not sustainable and… Read more
Investing With Style
Volume 13, Number 1, First Quarter 2015 Clifford S. Asness, Antti Ilmanen, Ronen Israel and Tobias J. Moskowitz Investors are bombarded by a variety of investment strategies from a growing and increasingly complex financial industry, each claiming to improve returns and reduce risk. Amid the clamor, academic research has sifted through the vast landscape and… Read more
OIS Discounting, Interest Rate Derivatives, and the Modeling of Stochastic Interest Rate Spreads
Volume 13, Number 1, First Quarter 2015 John Hull and Alan White Before 2007, derivatives practitioners used a zero curve that was bootstrapped from LIBOR swap rates to provide “risk-free” rates when pricing derivatives. In the last few years, when pricing fully collateralized transactions, practitioners have switched to using a zero curve bootstrapped from overnight… Read more
Reserve Primary: Fools Rush in Where Wise Men Fear to Tread!
Volume 13, Number 1, First Quarter 2015 Ozgur (Ozzy) Akay, Mark D. Griffiths and Drew B. Winters This is a clinical analysis of the demise of the Reserve Primary Fund, the first ever money market fund. Reserve Primary was caught in a perfect storm of its own making when the financial markets went into a… Read more
PRACTITIONER’S DIGEST
Volume 12, Number 4, Fourth Quarter 2014 View PDF… Read more
CASE STUDIES: Global Investing for the Value Trader
Jack L. Treynor Volume 12, Number 4, Fourth Quarter 2014 View PDF… Read more
BOOK REVIEW: Performance Evaluation and Attribution of Security Portfolios
Volume 12, Number 4, Fourth Quarter 2014 Performance Evaluation and Attribution of Security Portfolios Bernd R. Fischer and Russ Wermers Reviewed by Pierre-Emmanuel Marzouk View PDF… Read more
The Dependence of Upside Capture Ratios and Downside Capture Ratios on the Length of the Measurement Interval, Beta, and Alpha
Robert Ferguson, Danny Meidan and Joel Rentzler Volume 12, Number 4, Fourth Quarter 2014 Upside and downside capture ratios are used to assess the quality of investment managers and investment strategies. We propose a simple theoretical model which predicts that the upside capture ratio is an increasing function of the measurement interval length and that… Read more
Separating Winners From Losers Among Value and Growth Stocks in Different US Exchanges: 1969-2011
George Athanassakos Volume 12, Number 4, Fourth Quarter 2014 The purpose of this paper is twofold: (a) to determine whether there is value premium in our sample of US stocks for the period May 1, 1969–April 30, 2011; and (b) to examine whether an additional screening to the first step of the value investing process… Read more
A Simple Diversified Portfolio Strategy
Bernd Hanke and Garrett Quigley Volume 12, Number 4, Fourth Quarter 2014 We present a simple portfolio construction approach which is a blend of market weights and equal stock and sector weights. Our approach results in a highly diversified portfolio both on a stock level and on a sector level and generates higher portfolio returns… Read more
For Better Performance: Constrain Portfolio Weights Differentially and Globally
Haim Levy and Moshe Levy Volume 12, Number 4, Fourth Quarter 2014 Even after more than six decades since the publication of the breakthrough article by Markowitz, the Mean–Variance framework is still the most commonly employed portfolio management tool. Yet, as portfolio managers know all too well, the optimal diversification and the induced performance are… Read more
INSIGHTS: Free Cash Flows, Valuation and Growth Opportunities Bias
Hersh Shefrin Volume 12, Number 4, Fourth Quarter 2014 Analysts who base valuations on expected free cash flows are vulnerable to making biased assessments of terminal value because they fail to take into account the implications of disappearing growth opportunities during the terminal period. This leaves their valuations subject to “growth opportunities bias” (GOB). There… Read more
PRACTITIONER’S DIGEST
Volume 12, Number 3, Third Quarter 2014 View PDF… Read more
CASE STUDIES: Time Diversification
Jack L. Treynor Volume 12, Number 3, Third Quarter 2014 View PDF… Read more
INSIGHTS: Hedge Fund Beta Replication: A Five-Year Retrospective
Peter A. Lee and Andrew W. Lo Volume 12, Number 3, Third Quarter 2014 During the past few years, hedge fund beta replication strategies have become more common. At the same time, questions about the relevance, performance, and applicability of these strategies have been raised in response to the rapidly shifting landscape in the hedge… Read more
Large Price Changes and Subsequent Returns
Suresh Govindaraj, Joshua Livnat, Pavel G. Savor and Chen Zhao Volume 12, Number 3, Third Quarter 2014 We investigate whether large stock price changes are associated with short-term reversals or momentum, conditional on the issuance of analyst price target or earnings forecast revisions immediately following these price changes. Our study provides evidence that prices of… Read more
BOOK REVEIW: The Undercover Economist Strikes Back – How to Run or Ruin an Economy
Volume 12, Number 3, Third Quarter 2014 The Undercover Economist Strikes Back – How to Run or Ruin an Economy Tim Harford Reviewed by Javier Estrada View PDF… Read more
SURVEYS AND CROSSOVERS: A Survey of University Endowment Management Research
Georg Cejnek, Richard Franz, Otto Randl and Neal Stoughton Volume 12, Number 3, Third Quarter 2014 There is significant interest in how university endowments manage money and perform, and an emerging strand of finance research specializes in this growing area. The purpose of this paper is to survey and review the state-of-the-art in this field… Read more
Dilution of Sector Exposures: When Does Unintended Indexing Happen?
Michael Stein and Svetlozar T. Rachev Volume 12, Number 3, Third Quarter 2014 We analyze how the inclusion of several sectors in a portfolio leads to a countering of exposures and to a replication of the index. Using a weight-based measure, we find that on a composition level unintended indexing appears to happen with only… Read more
Corporate Credit Limits for Fixed Income Portfolios
Miikka Taurén and Thomas Philips Volume 12, Number 3, Third Quarter 2014 Fixed income portfolio managers and risk managers constantly grapple with the question of how to size their corporate credit trades. Their task is made more difficult by the fact that corporate credit events are rare, particularly among Investment Grade bonds, and that tail… Read more
PRACTITIONER’S DIGEST
Volume 12, Number 2, Second Quarter 2014 View PDF… Read more
CASE STUDIES: A Solution to the Trade Deficit?
Jack L. Treynor Volume 12, Number 2, Second Quarter 2014 View PDF… Read more