Vol. 19, No. 4, 2021 Practitioner’s Digest View PDF… Read more
4th Quarter (2021)
Are We at the Inflection Point of Climate Investing?
Vol. 19, No. 4, 2021 Yu (Ben) Meng Just as the ongoing pandemic demonstrates our vulnerability to the invisible hand of the COVID-19 virus molecule, the extreme climate events are constant reminders of our vulnerability to another molecule, carbon dioxide. As a result, all walks of society are asking for solutions, especially ones that involve… 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
Book Review: Trading at the Speed of Light: How Ultrafast Algorithms are Transforming Financial Markets
Vol. 19, No. 4, 2021 By Donald Mackenzie (Reviewed by Hanbin Im) View PDF… Read more
How Do Factor Premia Vary Over Time? A Century of Evidence
Vol. 19, No. 4, 2021 Antti Ilmanen, Ronen Israel, Rachel Lee, Tobias J. Moskowitz and Ashwin Thapar Evaluating how factor premia vary over time and across asset classes is challenging due to limited time series data, especially outside of US equities. We examine four prominent factors across six asset classes over a century. We find… Read more
The U.S. Treasury Term Structure and the Distribution of Real GDP Growth
Vol. 19, No. 4, 2021 J. Benson Durham Narrowing at the front but not the long end of the yield curve, notably in both expected rates and term premiums, forecasts lower mean real GDP growth and widens the distribution. But despite undue emphasis among some practitioners and the popular press on outright inversion and recession… Read more
Private Equity Valuation Before and After ASC 820
Vol. 19, No. 4, 2021 Peter Easton, Stephannie Larocque and Jennifer Sustersic Stevens We examine the effect of ASC 820 (formerly SFAS 157) on valuations reported by US private equity funds to their investors. In 2008, the FASB implemented ASC 820 to achieve more consistent measurement and increased transparency in fair value reporting. This new… Read more
Horizon-Adjusted Portfolio Performance Measure
Vol. 19, No. 4, 2021 Yoram Kroll and Moshe Ben-Horin This paper presents a portfolio performance measure that accounts for the investment horizon assuming both risk and loss aversion as suggested by Tversky and Kahneman’s CPT framework. The optimal portfolio risk premiums of such investors decrease with the length of the investment horizon and our… Read more