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
Articles
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
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
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
Does Factor Timing Explain Hedge Fund Alpha?
Hyuna Park Volume 12, Number 2, Second Quarter 2014 This paper empirically decomposes hedge fund excess return into factor timing, security selection, and risk premium. Portfolio-level tests show that security selection explains most of the excess return generated by hedge funds during 1994–2009, and the contribution of factor timing is small. Fund-level tests find significant… Read more
Restoring Value to Minimum Variance
Lisa Goldberg, Ran Leshem and Patrick Geddes Volume 12, Number 2, Second Quarter 2014 A long-only investable minimum variance strategy outperformed the S&P 500 over the four decades from January 1973 to December 2012. Through the lens of a factor model, we show that this outperformance can be largely attributed to implicit style bets. Specifically… Read more
The Shadow Price of Liquidity in Asset Allocation – A Case Study
Bac Van Luu, Yazid Sharaiha, Nikolay Doskov, Chirag Patel and David Turkington Volume 12, Number 2, Second Quarter 2014 We apply a framework for estimating the investor-specific value of liquidity which can be used to inform asset allocation decisions. The shadow price of liquidity is a central concept in this framework. In the case study… Read more
A Simple Model for the Expected Premium for Hedge Fund Lockups
Emanuel Derman Volume 5, Number 3, Third Quarter 2007 What excess return should a fund of funds expect to earn for investing in a hedge fund with an extended lockup? In this paper, we present a simple model for estimating the premium for long-term lockups. Because there is a demonstrated statistical persistence to the quality… Read more