Performance Analysis - Articles & White Papers

This paper investigates the determinants of the performance decay of known investment strategies after their publication in academic journals. Recently, several authors have conducted meta-analyses of the literature on stock return predictability. The overwhelming finding of these studies is that return predictability…

New indices are provided for ten emerging markets. Using data from companies listed in London and New York in the 1800s and 1900s, new stock market indices are produced and discussed providing information on companies in Turkey, Egypt, Cuba, China, Singapore, South Africa, Argentina, Brazil, Mexico and India. The papers…

Portfolio managers must make many practical decisions when employing a performance attribution methodology that can reveal key insights about the success of their investment strategies.

Classic bond pricing links, i.e., centralises, bond valuation across all maturities by specifying the dynamics of the short-term interest rate. This paper develops a decentralised theory that prices each bond based purely on the near-term behaviour of the bond’s own yield. The theory levers the domain expertise of an…

What are the impacts of stagflation on financial markets? Co-CIO Bob Prince shares Bridgewater’s analysis on what’s transpired and what’s yet to come.

The authors provide the first quantitative survey of the empirical literature on hedge fund performance. They examine the impact of potential biases on the reported results. Using a sample of 1,019 intercept terms from regressions of hedge fund returns on risk factors (the 'alpha') collected from 74 studies…

This paper produces multiple fund-of-funds’ portfolios based on sorting and a novel non-parametric approach to lend in-depth insights into the extent hedge fund returns display higher order (non-linear) persistence patterns. By exploiting monthly data from Hedge Fund Research Database between 1999:1 to 2015:12, an out-of-…

Not all hedge fund are alike and neither are their strategies. Advisers and fund selectors must therefore give due consideration to whether the Sharpe ratio is the going to be the catch-all risk return metric for analysing hedge fund manager performance.

The authors propose an innovative methodology for decomposing the value added generated by a money manager within a given assessment interval into the contributions of the manager's investment decisions made in the various periods, in order to identify the most (and the least) impactful period decisions. To this end,…

This article is an investigation into what U.S. Ivy League and major U.S. university endowment performance may look like ahead of forthcoming reporting dates.

Press coverage of private equity focuses almost exclusively on second-order concerns over disclosure, fees, layoffs, debt, and an occasional scandal. Rarely is attention given to the first order benefit of high risk-adjusted returns. The higher private equity returns did not come with higher risk. The annualiaed standard…

An abundance of evidence relates facial width-to-height ratio (fWHR) to masculine behaviours in males. The authors show that hedge funds operated by high-fWHR managers underperform those operated by low-fWHR managers, bear greater downside risk, are more susceptible to fire sales, and fail more often.

It is shown, through a theoretical model, how firms fundamentals should influence stock (scaled) prices. A sample of about 5,000 stocks from 30 developed countries is studied over a period of seventeen years. The empirical evidence is consistent with the theoretical assumptions made, but the ability of firm fundamentals to…

Despite the fact that a company’s internally generated intangible investments create future value, under current U.S. generally accepted accounting principles, internally developed intangibles are not included in reported assets. While research and development (R&D) is an important intangible asset, so too is branding.…

Using new annual data of 16 developed countries across bond, equity, and housing markets, the authors studies the return predictability using the payout-price ratios, i.e., coupon price, dividend price, and rent price.

This study assesses relations between decade-horizon compound returns to U.S. common stocks and contemporaneous accounting-based firm characteristics, including net income growth, sales growth, asset growth, and average profitability (income-to-assets ratio). The results indicate that stock portfolios created by sorting on…

Unlike individual stocks, more than 67% of sector ETFs have lifetime buy-and-hold returns that are higher than the T-bill rates. Thus, the majority of sector ETFs outperform T-bills. However, less than 26% of sector ETFs have lifetime buy-and-hold returns that are higher than SPY, an index ETF that is a proxy for the overall…

The market selloff this year highlighted how quickly exciting – but unprofitable – companies can fall from grace. In this article, Jamie Catherwood reveals how the composition of market returns has evolved over time, and underscores the importance of fundamentals in driving long-term outperformance.

This paper studies firms’ cash holdings and the implications for asset prices and financial stability. Corporate cash piles vary across companies and over time, and cash holdings are important for financial stability because of their value in crises. Firms’ cash holdings earn low returns that are correlated across firms.…

Evaluating manager performance is difficult as it requires an appropriate benchmark. The manager’s benchmark selection is often not objective given conflicts of interests. Factor exposure analysis can be used to systematically identify the best benchmark.