Risk and Portfolio Construction

Are you measuring risk wrong?

Our most popular "risk management" papers appear to be those which challenge users in their methodologies for risk measurement and management.

Here is a small taster of three of these papers:

1. The Divergence of High- and Low-Frequency estimation (State Street)

This paper is a collaborative effort between State Street Global Exchange and Windham Capital Management. It provides findings that are important to asset allocators looking at long-term asset allocation goals.

2. Risk Factors as Building Blocks for Portfolio Diversification (Callan Associates)

Theoretically, the use of risk factors could lead to more efficient allocations than traditional methods, but many investors are not fully implementing such methods because of practical issues. The authors demonstrate how the intuition of a risk factor portfolio could be used to improve its diversification and augment and refine traditional allocations.

3. Asset Class Risk - Methodology Overview (Research Affiliates)

The size premium has been contested in many ways: it has depleted since its discovery in the early 1980s, resides predominantly in January, is concentrated among microcaps, and is contained by proxies for illiquidity. The author, however, dismantle these challenges by controlling for the quality of the term.