Professional and academic papers using quantitative methods. All of the research in this section is either about the use of quant techniques, or uses quant methodology (mathematical formulae) within the text. The most viewed quant research in this section are papers focused on alpha strategies, particularly for tactical asset allocation. A key issue for quant analysts here is the robustness and validity of the quant model. One paper refers to the risk of "pseudo-mathematics" and "financial charlatanism", when data is... mined to conceive spurious relationships which don't survive out-of-sample. Therefore, quant papers providing a statistical framework for assessing the robustness of quantitative models (and reducing the risk of overfitting) have generated a lot of interest. Our most downloaded quant research in this section includes papers on risk estimation, performance attribution, big data and risk premia. Other popular reports and white papers cover risk factors and smart beta / scientific beta / alternative beta.
Factor investing has never been as popular as it is today. However, with the propagation of this type of investment approach, the equity space is becoming increasingly saturated with more and more factors that are ever more removed from academically-grounded research. This paper discusses factor definitions used in…
Investors’ appetite for stocks frequently mentioned in the news is often raised to explain the Volatility effect. But our empirical analysis shows this theory holds little water.
Now in its sixth year, the FTSE Russell global institutional survey provides unique insight into major trends in awareness, popularity and the use of smart beta among global asset owners. This year it has produced an additional report that examines the integration of ESG into smart beta strategies…
Defensive equity strategies have obvious appeal, but how do you get the most out of their potential benefits? We look at how to best differentiate between the multitudes of approaches, evaluate and classify them by outcome, and implement them within your equity allocation and overall portfolio.
Defensive equity strategies have obvious appeal, but how do you get the most out of their potential benefits? We look at how to best differentiate between the multitudes of approaches, evaluate and classify them by outcome, and implement them within your equity allocation and overall portfolio.
We believe that a better approach for investors seeking traditional EM exposure is through actively managed strategies that focus on country-level macroeconomic and political research and standalone analysis of specific risk factors such as currency, credit spreads and interest rates.
The exercise of translating a specified future investment objective into a strategy to be implemented in the present requires vision. It necessitates the ability to effectively evaluate today’s opportunities, conceptualize the risks that may materialize across an investment horizon, and implement a plan to manage those risks…
The longest equity bull market in history, persistently low interest rates and increased longevity have sparked renewed interest in defensive equity investing. Defensive equity strategies now comprise a mature category, which demands a fresh look: what is a defensive equity strategy, why does it deliver, what are the risks,…
The longest equity bull market in history, persistently low interest rates and increased longevity have sparked renewed interest in defensive equity investing. Defensive equity strategies now comprise a mature category, which demands a fresh look: what is a defensive equity strategy, why does it deliver, what are the risks,…
Vanguard research shows that liability-hedging strategies should focus on the portions of the liability that contribute the most to risk rather than hedging all components equally. Our analysis shows that hedging long-dated liabilities is expected to mitigate surplus risk to the greatest extent possible. Strategies should…
The excess returns associated with Value and Momentum result from convergent and divergent processes, respectively. Value stocks are systematically underpriced and gradually converge on their fair value over time. Momentum stocks start out fairly valued or slightly overvalued, and go on to become more overvalued in the short…
The equity risk premium is the price of risk in equity markets, and it is a key input in estimating costs of equity and capital in both corporate finance and valuation. Given its importance, it is surprising how haphazard the estimation of equity risk premiums remains in practice. Professor Aswath Damodaran begins this paper…
This paper presents a framework for understanding the drivers of trend-following returns. It shows that recent performance challenges are primarily due to muted moves across global markets rather than a change in trend following’s ability to translate market trends into profits. This underscores the view that trend following…
Tontines and similar mortality-pooled investment arrangements offer a useful and unique value proposition to the global retirement challenge. A tontine is a financial arrangement in which members form an asset pool and agree to receive payouts from it while living and to forfeit their accounts upon death. Forfeited balances…
One key measure of successful active management lies in the ability of a manager or a strategy to outperform their peers repeatedly. Consistent success is the one way to differentiate a manager’s luck from skill. The S&P Persistence Scorecard shows that few funds consistently outperformed their peers; 11.4% of domestic…
Many investors buy U.S. Treasuries to hedge equity risk. But do long Treasuries deliver the optimal risk/return trade-off? Research by PIMCO experts investigates this question by analyzing the optimal allocation of duration along the yield curve. The y find that a dynamic swap overlay strategy – positioned along the yield…
In this paper by Mellon Capital, the authors argue that the primary concern of corporate bond investors is estimating the expected excess return above Treasuries in order to justify additional risk. The option-adjusted spread of corporate bonds over Treasuries is frequently used to measure this expected excess return. They…
This paper provides an overview of S&P Dow Jones Indices’ methodology for defining the U.S. mid-cap equity universe. It outlines the so-called “mid-cap premium,” analyzing it from factor and sector perspectives. It shows that active managers have underperformed the S&P MidCap 400, historically. It highlights how mid-…
This paper presents the investment principles, design and performance of Scientific Beta's single smart factor indices that reconcile strong exposure to the desired factor tilt and high factor intensity as well as better long-term risk-adjusted performance. The offering provides investors with a robust menu of single…
The S&P GIVI (Global Intrinsic Value Index) Japan underperformed its benchmark index, the S&P Japan BMI, by 1.27% in Q2 2019.1 Since its launch in March 2012, the S&P GIVI Japan has outperformed its benchmark index by 0.41% per year, with a tracking error of 2.52%.
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