Volume 15, No. 1, 2017 Joshua Livnat, Gavin Smith and Martin Tarlie One of the most crucial decisions for investors and plan sponsors is the selection of funds among the thousands of available alternatives.We find that regardless of the initial criterion used to rank funds based on past performance, more diversified top funds outperform concentrated… Read more
Articles
A Machine Learning Approach to Research Curation for Investment Process
Volume 15, No. 1, 2017 Sonya Cates, Stephen Lawrence, Carla Penedo and Viktoriia Samatova Many investment professionals consider academic research instrumental in improving the quality of the investment process. However, it is hard to extract investment insights from the vast and rapidly expanding research corpus, which requires a large amount of time and human effort… Read more
Moore’s Law Vs. Murphy’s Law in the Financial System: Who’s Winning?
Volume 15, No. 1, 2017 Andrew W. Lo Breakthroughs in computing hardware, software, telecommunications, and data analytics have transformed the financial industry, enabling a host of new products and services such as automated trading algorithms, crypto-currencies, mobile banking, crowdfunding, and robo-advisors. However, the unintended consequences of technology-leveraged finance include firesales, flash crashes, botched initial public… Read more
Mean–Variance Optimization with Public and Private Asset Classes
Volume 14, Number 4, 2016 Yu (Ben) Meng, Pu (Paul) Zhang and Ryan Ong Liquidity has long been of great interest to investment professionals as well as academic researchers. The estimation of the illiquidity premium for infrequently traded asset classes, such as real estate and private equity, presents a challenge to the industry because of… Read more
Can Fundamental Factors Enhance the Performance of Traditional Momentum Strategies?
Volume 14, Number 4, 2016 Susana Yu and Gwendolyn Webb We test whether price-based momentum strategies can be improved by additional screening based on fundamental measures. Within the framework of portfolio formation based on recent winning or losing stocks, we further screen on the basis of fundamental measures of financial strength and gross profitability. Our… Read more
A New Look at Discount Returns: Implications for the Global Investor
Volume 14, Number 4, 2016 Anthony Tessitore and Nilufer Usmen This paper examines risk–return characteristics of discount returns on portfolios of closed end funds and how they might benefit investors. Discount return is defined as the percentage change in discounts over a period. This paper focuses on the distribution of discount returns conditioned on discount… Read more
After-Tax Portfolio Value: The Missing Tax Option
Andrew Kalotay Volume 14, Number 4, 2016 After-tax performance measurement requires a rigorous definition of after-tax portfolio value, which is also a prerequisite for effective portfolio management. The focus of this paper is the tax option, which is the right to execute tax-beneficial transactions. This option is a critical component of after-tax portfolio value. Some… Read more
The Profitable Dividend Yield Strategy
Volume 14, Number 3, Third Quarter 2016 Wai Mun Fong and Zhehan Ong Stocks with high dividend yield (DY) have value-like returns and defensive qualities that make them highly attractive to investors. We show that this investment strategy can be powerfully enhanced by choosing stocks with both highDY and high gross profits-to-assets (GPA). Consistent with… Read more
It’s Easy to Beat the Market
Volume 14, Number 3, Third Quarter 2016 Moshe Levy The perception that it’s hard to beat the market portfolio is widespread. Indeed, passive investment has more than doubled in the last decade. While various different strategies have been suggested to outperform passive indexing, the market is still considered by many as the relevant benchmark to… Read more
How Do Private Equity Investments Perform Compared to Public Equity?
Volume 14, Number 3, Third Quarter 2016 Robert S. Harris, Tim Jenkinson and Steven N. Kaplan The merits of investing in private versus public equity have generated considerable debate, often fueled by concerns about data quality. In this paper, we use cash flow data derived from the holdings of almost 300 institutional investors to study… Read more