Second Quarter (2019)

Volume 17, No. 2, 2019 Edmund Bellord, Joshua Livnat, Dan Porter and Martin B. Tarlie The growing dominance of the core and explore model — a large passive index combined with a collection of high tracking error satellite portfolios — in conjunction with the growth of factor investing has renewed interest in how to allocate… Read more

Volume 17, No. 2, 2019 Michael Reher and Celine Sun We study the value added of automated financial management (AFM) services along two dimensions: diversification and account size exibility. First, using a company-specific experiment with matched AFM and traditional portfolios, we find that AFM portfolios are significantly better diversified. Underdiversified investors are more likely to… Read more

Volume 17, No. 2, 2019 Thomas Shevlin This paper looks to establish a new heuristic for investors, giving them a simple, intuitive way to relate bond yields to prevailing trends in growth and inflation. The model offers an alternative to forecasting surveys, which have been over-estimating 10-year Treasury yields for decades and continue to project… Read more

Volume 17, No. 2, 2019 James X. Xiong and Thomas M. Idzorek Diversification is widely viewed as the “only free lunch” of finance. Unbeknownst to the free lunch crowd, skewness is typically positive for individual stocks and negative for diversified portfolios and thus diversification is not free. This undesirable move from positive to negative skewness… Read more

Volume 17, No. 2, 2019 Shomesh Chaudhuri, Katherine Cheng, Andrew W. Lo, Shirley Pepke, Sergio Rinaudo, Lynda Roman and Ryan Spencer We consider a portfolio-based approach to financing ovarian cancer therapeutics in which multiple candidates are funded within a single structure. Twenty-five potential early-stage drug development projects were identified for inclusion in a hypothetical portfolio… Read more