Vol. 20, No. 2, 2022 by Jonathan T. Vu, Benjamin K. Kaplan, Shomesh Chaudhuri, Monique K. Mansoura and Andrew W. Lo Recent outbreaks of infectious pathogens such as Zika, Ebola, and COVID-19 have underscored the need for the dependable availability of vaccines against emerging infectious diseases (EIDs). Prior to the COVID-19 pandemic, the cost and… Read more
Articles
Sustainable Alpha in Sovereign and Corporate Bonds
Vol. 20, No. 2, 2022 by Karishma Kaul, Katharina Schwaiger, Muling Si and Andrew Ang We construct fixed income portfolios for sovereign bonds and corporate bonds with sustainable insights. The climate methodology for sovereign bonds can be applied as an overlay on any benchmark and tilts toward sovereigns more prepared with the climate transition and… Read more
Sustainable Investing From a Practitioner’s Viewpoint: What’s in Your ESG Portfolio?
Vol. 20, No. 2, 2022 by Jeffrey R. Bohn, Lisa R. Goldberg and Simge Ulucam Many investors have shifted their asset allocations to account for Environmental, Social, and Governance (ESG) issues. While we welcome this shift from an ethical perspective, the financial and non-financial benefits of ESG investing as well as best practices for portfolio… Read more
ESG, Investing, and Corporate Finance: Some Basic Questions
Vol. 20, No. 2, 2022 by Bradford Cornell This paper is devoted primarily to asking questions about the implications of the growing focus on ESG (environment, social and governance) for investing and corporate financial policy rather than offering answers. Many of the questions raised here were anticipated by Milton Friedman in his classic New York… Read more
Exponential Glide Paths
Vol. 20, No. 1, 2022 by Moshe Levy and Haim Levy In the absence of market-timing ability, investors are better-off keeping their asset allocation constant through time. Target-date funds help reduce variation in the asset allocation, by taking into account that human capital, which is a part of the investor’s total portfolio and is typically… Read more
How Well Do Factor ETFS Capture the FAMA–French Factors?
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
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
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