Fourth Quarter (2019)

Vol. 17, No. 4, 2019 John Hull, Andrew W. Lo and Roger M. Stein We define long shots as investment projects with four features: (1) low probabilities of success; (2) long gestation lags before any cash flows are realized; (3) large required up- front investments; and (4) very large payoffs (relative to initial investment) in… Read more

Vol. 17, No. 4, 2019 Marco Aiolfi and Yesim Tokat-Acikel Investors are increasingly showing interest in risk premia strategies across asset classes. Carry is one of the most studied premia. To successfully execute a risk premia strategy, it is important to have a detailed understanding of how individual premia returns are affected by macroeconomic conditions… Read more

Vol. 17, No. 4, 2019 Martin Fridson, CFA, Begum Ipek Yavuz, Kai Zhao and Yan Yu Past comparisons of “market ratings,” or yield spreads over Treasury rates, and letter grades published by credit rating agencies have focused on the two indicators’ respective records in predicting defaults or promptness in reflecting company-specific changes in credit quality… Read more

Vol. 17, No. 4, 2019 Wenfeng Wu, George Xiang and Tong Yu Alternative index products often achieve improved performance at the cost of increased exposure to risk. In this study, we propose a portfolio tilting strategy that alleviates the risks inherent to alternative indices by projecting fundamental factors on risk factors to purge the influence… Read more