Volume 14, Number 2, 2016 Gregg Fisher, Ronnie Shah and Sheridan Titman This paper considers several popular portfolio implementation techniques that maximize exposure to value and/or momentum stocks while taking into account transaction costs. Our analysis of long-only strategies illustrates how a strategy that simultaneously incorporates both value and momentum outperforms a strategy that combines… Read more
Articles
Market Risk, Mortality Risk, And Sustainable Retirement Asset Allocation: A Downside Risk Perspective
Volume 14, Number 2, 2016 W. V. Harlow and Keith C. Brown Despite its clear importance, there is no consensus on the optimal asset allocation strategy for retirement investors of varying age, gender, and risk tolerance. This study analyzes the allocation question by focusing on the downside risks that result from the joint uncertainty over… 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
Mass Customization Versus Mass Production – How an Industrial Revolution is About
Volume 14, Number 3, Third Quarter 2016 Lionel Martellini While mass production has happened a long time ago in investment management through the introduction of mutual funds and more recently exchange traded funds, a new industrial revolution is currently under way, which involves mass customization, a production and distribution technique that will allow individual investors… 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
SOVEREIGN WEALTH AND RISK MANAGEMENT: A FRAMEWORK FOR OPTIMAL ASSET ALLOCATION OF SOVEREIGN WEALTH
Zvi Bodie and Marie Briere This paper sets out an analytical framework for optimal asset allocation of sovereign wealth, based on the theory of contingent claims analysis applied to the sovereign’s economic balance sheet. A country solves an asset-liability management problem involving its sources of income and its expenditures. We derive analytically the optimal asset… Read more