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Rethinking Portfolio Risk and Performance Attribution - the top papers

(This blog has since been updated with a newer post on the topic of Attribution Analysis and Risk-Adjusted Returns)

Portfolio risk, attribution analysis and risk factors

Some of the most popular papers on Savvy Investor are those which challenge accepted conventions; which oppose the mantra of "we've always done it like this".

The papers below all address the analysis of portfolio risk and attribution. Some summarise the status quo, while others challenge investors to think beyond it.

For readers specifically interested in portfolio attribution papers, our latest Savvy Blog can be found at

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Multi-Dimensional Risk and Performance Analysis for Equity Portfolios (EDHEC, 2016)
In this report, EDHEC-Risk Institute explores the challenge of consistent risk analysis and performance attribution for equity portfolios, using multiple dimensions and including micro attributes.

The Divergence of High- and Low-Frequency estimation (State Street / Windham)
When measuring risk, how much thought do you actually give the time-period used? This 20-page paper from State Street and Windham Capital highlights the significant implications of selecting hourly, or daily, or weekly or monthly, or yearly data. It is crucial that the time period chosen matches your real objectives.

The Free Lunch: The Value of Decoupling Diversification and Risk (Salient, 2016)
This paper discusses why considering diversification and risk independently may help investors build more efficient portfolios.

Total Portfolio Performance Attribution Methodology (Morningstar)
This paper by Morningstar examines the thinking behind total portfolio performance attribution, from basic mathematical expressions to multi-period methodology.

A Framework for Institutional Portfolio Construction (Vanguard, 2016)
Institutional investors typically pursue one of four investment goals: absolute return, liability-driven investment, total return or principal protection. This paper considers which are the best for investors building their portfolio.

How the Science of 'Rewarded Risk' is Redefining Diversification (BlackRock, 2015)
This paper suggests that asset classes are a composite of six common risk factors. It proposes that these fundamental risk factors offer more precision and clarity regarding the drivers of asset class returns and their co-movements.

Rethinking Investment Performance Attribution (AIMCO, 2014)
This article describes the Alberta Investment Management Corporation’s journey to developing a performance attribution system as an investment management tool. 

EPD - A New Measurement of Diversification (Standard Life, 2016)
This paper proposes a new metric for measuring diversification. There isn't a universally agreed measure of diversification within asset management, making it difficult for investors to evaluate portfolio construction methodologies.

Understanding Modern Portfolio Construction (Cullen Roche, 2016)
In this paper, Cullen Roche argues that the portfolio construction process followed by many asset managers is based on misguided theories which lead to "unrealistic" frameworks. Roche seeks to present a better framework.

Equity/Bond Correlation: History and Future Prospects (BlackRock, 2016)
In this short paper, two BlackRock strategists examine the history of the equity/bond correlation and discuss the likely future path.

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