Professional articles and academic papers on performance analysis. Attribution analysis seeks to compare the return from a fund with the return from a benchmark, and to explain the differences by decomposing the excess return into its component parts. Some of our most popular research on attribution analysis considers performance attribution methodology from first principles, providing... a primer on attribution analysis and models. Others white papers and reports focus on particular models, such as the Brinson Model, fixed income return attribution, equity attribution analysis, or the dissecting of hedge fund returns. A key aspect of performance is of course reporting to clients, and here the CFA provides guidance for effective investment reporting with its Principles for Investment Reporting model, known as GIPS (Global Investment Performance Standards) and encapsulated in the GIPS Handbook. A proper attribution of returns illuminates the contribution made by active managers, enabling judgements to be formed of whether excess returns have arisen from skill or luck. For most investment strategies, however, an extended period of time is required before such judgements can be made with any confidence.
It has been widely observed that capitalization-weighted indexes can be beaten by surprisingly simple, systematic investment strategies. Indeed, in the U.S. stock market, equal-weighted portfolios, random-weighted portfolios, and other naive, non-optimized portfolios tend to outperform a capitalization-weighted index over…
It has been widely observed that capitalization-weighted indexes can be beaten by surprisingly simple, systematic investment strategies. Indeed, in the U.S. stock market, equal-weighted portfolios, random-weighted portfolios, and other naive, non-optimized portfolios tend to outperform a capitalization-weighted index over…
Multi-Asset Strategist Adam Berger addresses three topics that are top of mind with investors: where we are in the cycle, recent emerging market underperformance, and the lessons from the 2008 financial crisis that can be applied today.
When it comes to the active versus passive debate, one of the key measurements of successful active management lies in the ability of a manager or a strategy to deliver above-average returns consistently over multiple periods. Demonstrating the ability to outperform peers repeatedly is the one way to differentiate a manager’…
Cliff Asness examines what has been a year of pain for liquid alts. Even as systematic value has mildly come back, other factors have taken up its mantle, further turning the screw. A bad year is expected occasionally, and we all understand this even if nobody likes it. But, given that our alts (as defined in this paper) are…
The biggest failure in investment management—the gap between the returns realized by the investor and the returns earned by the strategy or fund the investor owns—typically remains in the shadows with the glare of the spotlights focused on alpha. Smart beta is no exception. The authors propose two ways to reframe the client…
This paper offers a framework that allows for the estimation of relative research values across markets and constituents, under certain stylized (but reasonable) assumptions. We estimate value by adjusting dispersion, the difference in performance between winners and losers, for capacity, the potential size of active…
Traditionally, in times of slower economic growth, when the central bank is being accommodative via a low interest rate policy, yield-seeking investors turn to dividend yield.
The benefits of diversification are often touted, but many investors feel disappointed in diversified portfolios because of the dispersion in performance of the individual holdings. Since we only experience one path of history, it is difficult to assess the benefit of diversification unless we consider what could have…
Lazard Asset Management reviews growth, value, sentiment, quality, and risk factor returns across multiple equity markets for the month of October 2018.
If you were transported 100 years into the future, what would be your expected 10-year equity return? In other words, knowing nothing about the price-to-earnings level, the shape of the rates curve or the political zeitgeist, what is the intrinsic strategic return of each asset class? From a tactical viewpoint, returns will…
This paper analyzes and quantifies the impact that future earnings outcomes have on the returns of value stocks. Its authors introduce and evaluate a simple quantitative investment strategy that improves on the returns of a conventional value strategy by tilting its exposure in the direction of value stocks with the highest…
On the one-year anniversary of the launch of OppenheimerFunds’ suite of multi-factor ETFs in collaboration with the global index provider FTSE Russell, the firms examined key factors driving US large cap equity market performance over the last year based on performance of the US large-cap Russell 1000 OFI Dynamic Multifactor…
Recent findings for the U.S. stock market indicate that cash-based profitability measures (i.e., profitability measures that exclude accounting accruals) outperform measures of profitability that include accruals. We demonstrate that this result also holds for international markets. In a comparison of different profitability…
The Internal Rate of Return (IRR) has several well documented issues but remains the most commonly used measure of private market performance.
One of the most commonly cited issues relates to how early strong performance can ‘bake in’ a good long-term performance, as shown in figure 1. For managers with long track…
Although there has been a substantial flow of money over the last twenty years into index tracking funds and ETFs, the vast majority of equity investment in mutual funds is still being managed on an active, discretionary basis. In the US and the UK active management still accounts for around 75% of equity mutual fund…
The Performance Analytics functionality of eVestment Private Markets originally set out to help institutional investors streamline and enhance their quantitative due diligence process. While this remains as the primary use, a growing proportion of our clients have also found the powerful analytics capabilities of the tool…
Does a factor model exist to absorb all existing anomalies? We provide a deep learning automated solution to generate long-short factors using a high-dimensional firm characteristic. Sorting securities on firm characteristics is a common practice in finance and a nonlinear activation function built into deep learning. Our…
