Quant and Tools

Quant and Tools - Articles & White Papers

White papers and reports exploring quantitative investment and investment tools. Research for quant managers and analysts in this section covers academic papers on portfolio optimisation, articles on trading strategies for model-driven alpha creation, managing index funds, papers on derivatives pricing, and articles on performance attribution analysis. The "tools" component of this section refers to investment tools which help portfolio managers to do their job. For instance, ETFs may be considered a "tool" to make a short term allocation to specific asset class or strategy. Investment technology is a "tool" used throughout the investment process. This heading includes research on alpha creation, including: quantitative approaches to asset allocation and investment technology, Big Data, and the role of technology within asset management. For lists of white papers on specific quant topics - such as index investing, derivatives pricing, attribution analysis or trading models for alpha generation - please use the search menu at the top or click on the appropriate selection in the topic menu.
  • EDHEC-Risk Institute

    Is Smart Beta just Monkey Business? Factor Exposures, Upside-Down Strategies and Rebalancing (EDHEC)

    The “Monkey portfolio” proposition is that smart beta strategies can be deployed naively, with the assurance that all such strategies will add value. EDHEC's research suggests otherwise, with many smart beta strategies having exposure to other factors. The authors warn that care is needed to avoid over-extrapolating the implications of a particular test ...

    • Professional
    • Views: 1834
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  • Robeco

    The Future of Asset Management (Robeco, 2016)

    The business of investment management will change significantly in the years ahead. Demographic and regulatory trends have imposed gradual change upon the industry, but technological developments are now injecting more urgency into the pace of change. In this white paper, Robeco examines the forces that are driving change, and how this will transform the industry. The authors ...

    • Professional
    • Views: 2464
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  • CFA Institute Research Foundation

    Factor Investing and Asset Allocation (CFA Institute Research Foundation)

    Factor investing is as old as the hills. Yet it has only recently become a widespread practice. What is behind this sudden change in the investment management industry? What do analysts at firms that engage in factor investing do? What results might investors using these techniques expect? Here is a hugely important read to explore these questions.

    • Professional
    • Views: 1860
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  • EDHEC-Risk Institute

    Multi-Dimensional Risk and Performance Analysis for Equity Portfolios (EDHEC)

    Multi-factor models are commonly used for risk analysis and performance attribution of equity portfolios. Equity portfolio managers are interested not only in assessing the impact of common factors, but also in understanding the impact of stock-specific attributes upon portfolio risk and performances. In this report, EDHEC-Risk Institute explores the challenge of consistent risk ...

  • AQR Capital Management

    Fact, Fiction and Momentum Investing (AQR Capital, 2014)

    Authored by Cliff Asness and others from AQR Capital, this paper examines the "myths" surrounding momentum investing, using results from a variety of academic studies. The paper aims to clarify the facts with regard to the efficacy of trend-following strategies and to document the practical value of momentum within the investment process.

  • Robeco

    How will Blockchain impact the Financial Industry? (Robeco, 2016)

    There is growing agreement that Blockchain technology, though overhyped, is here to stay. This excellent report from Robeco explains the distributed ledger technology, transaction flows and the eco-system. It then examines the ways in which it might transform the asset management industry in the future. 

    • Professional
    • Views: 1908
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  • Equity Risk Premiums: Determinants, Estimation and Implications (Damodaran, 2016)

    In this paper, Professor Aswath Damodaran examines ways of estimating equity risk premiums (ERP). He begins by considering the economic determinants of ERP, including information uncertainty, perceptions of macroeconomic risk and risk aversion by investors. This is the 9th edition of this paper. It has been produced annually since the global financial crisis of 2008.

  • Vanguard

    A framework for institutional portfolio construction (Vanguard, 2016)

    Typically, institutional investors around the world pursue one of four investment goals: absolute return, liability-driven investment, total return or principal protection. Generally, they choose from four different investment approaches: static tilts, traditional active management, market-capitalization exposures and alternative investments. Given the aforementioned potential ...

    • Professional
    • Views: 2377
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  • A Quantitative Approach to TAA (Mebane Faber)

    This influential paper is Mebane Faber's update to his 2006 version. It incorporates new data from the period 2008-2012. The paper investigates how well the original work has held up since publication. Faber finds that overall, the models achieve equity-like returns with bond-like volatility and drawdowns, which was his original thesis in the 2006 paper. He also examines the ...

    • Quantitative
    • Views: 1234
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  • BlackRock

    Active Strategies, Indexing and the Rise of ETFs (BlackRock, Oct 2017)

    Institutional flows into ETFs are expected to grow to $300B annually by 2020. Institutional Investors around the world are stepping up their use of ETFs as part of a broad transformation in portfolio management. Driving this growth is a wholesale reconsideration of the long-held distinction between active and indexed investment approaches.

    This paper presents the ...

  • Invesco (Europe)

    Invesco Global Factor Investing Study 2017

    Our factor investing study offers unique insights into the growth of factor investing via over 100 in-depth face-to-face interviews with consultants, pension funds, insurers, sovereign investors and private banks globally. We spoke with investors that were leading the way when it came to factor investing as well as non-users who were yet to adopt this investment approach.

    For ...

  • Robeco

    Ten things you should know about factor investing (Robeco, 2017)

    Factor-based investing has gained considerable traction over the past decade. Concepts such as ‘factor premiums’ or ‘smart beta’ have become popular buzzwords, and now appear frequently in mainstream financial media. Prominent institutional investors have also publicly embraced allocation to well-known factors, like value, momentum or low volatility.

    But ...

    • Short article
    • Views: 914
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  • MSCI

    Bridging the Gap: Adding Factors to Passive and Active Allocations (MSCI)

    • 04 May 2017
    • Company: MSCI

    Asset owners face a challenge in determining how the factor allocation fits into the overall equity program: How does the factor allocation relate to the existing roster of active managers? This paper uses a risk budgeting framework to investigate how active mandates and factor allocations can be combined. Risk budgeting connects the manager selection process with the factor ...

    • Professional
    • Views: 1039
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  • CFA Institute

    Inefficiencies in the Pricing of Exchange-Traded Funds (Financial Analysts Journal, 2017)

    This 31-page paper appears in CFA Institute's Financial Analysts Journal. It examines the topic of ETF pricing inefficiencies. Despite the arbitrage mechanism that allows authorized participants to create and redeem shares for the underlying portfolios, ETF prices can deviate significantly from the net asset values. Typically, the deviations are larger in funds holding ...

  • QMA (Quantitative Management Associates)

    Start of Something Big: Demystifying the Source of Large Alpha in Small Caps (QMA)

    In a world where alpha can seem scarce, active small-cap managers continue to outperform their benchmarks in an impressive way. But why? Investors have a general sense small caps are riskier and less efficient, but how these characteristics contribute to more alpha opportunities remains unclear. At QMA, we think it’s critical to understand the sources of returns so that you ...

    • Professional
    • Views: 1136
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  • CFA Institute

    Fundamentals of Efficient Factor Investing (Financial Analysts Journal, 2017)

    This paper appeared in CFA Institute's Financial Analysts Journal. Combining long-only-constrained factor subportfolios is generally not a mean–variance-efficient way to capture expected factor returns. For example, a combination of four fully invested factor subportfolios—low beta, small size, value, and momentum—captures less than half ...

    • Professional
    • Views: 1330
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