Quantitative Methods

Quantitative Methods - Articles & White Papers

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.
  • Robeco

    Exploring the world of factors - Nine academics on smart beta and factor investing (Robeco, 2018)

    Collected interviews with high-profile factor investing experts, who bring an original contribution to the discussion. The concept of factor investing dates back to the 1970s, but it has only been gaining traction over the past few years. Factor-based allocation has its roots in the vast amount of empirical findings, accumulated over many decades, that document the existence of ...

    • Professional
    • Views: 1100
    Read more
  • AQR Capital Management

    Fact, Fiction and Momentum Investing (Cliff Asness et al, 2015)

    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.

  • 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.

  • Cambria Investments

    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: 1306
    Read more
  • MSCI

    How ESG Affects Equity Valuation, Risk, and Performance (MSCI, 2017)

    • 21 Dec 2017
    • Company: MSCI

    Many researchers have studied the relationship between companies with strong environmental, social and governance (ESG) characteristics and corporate financial performance. A major challenge has been to show that positive correlations — when produced — provide explanations for the behavior. As the classic phrase used by statisticians says, “correlation does not ...

    • Professional
    • Views: 1227
    Read more
  • 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 ...

    • Professional
    • Views: 1013
    Read more
  • 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: 1477
    Read more
  • Eaton Vance Management International

    Managing equity portfolio volatility by harnessing the volatility risk premium (Eaton Vance, May 2017)

    After eight years of stock market gains, many investors have tempered their return expectations and are focusing attention on how best to best achieve equity-like returns with less risk. One relatively new solution investors are exploring is the use of option-based strategies that seek to harness the Volatility Risk Premium.

    • Professional
    • Views: 1158
    Read more
  • QMA

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

    • 24 Jan 2017
    • Company: 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: 2032
    Read more
  • 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: 1368
    Read more
  • EDHEC-Risk Institute

    Robustness of Smart Beta Strategies (EDHEC)

    This EDHEC paper examines the importance of robustness for smart beta strategies, explaining how a strategy being "relatively robust" differs from "absolute robustness". The authors describe how the robustness of smart beta performance can be assessed and quantified, describing various approaches, which may be used to improve the robustness of smart beta ...

    • Professional
    • Views: 1450
    Read more
  • The Divergence of High- and Low-Frequency estimation

    This paper is a collaborative effort between State Street Global Exchange and Windham Capital Management. It provides findings that are important to asset allocators looking at long-term asset allocation goals. High-frequency estimation, according to the paper, does not predict behavior reliably in the long-term, even if no sampling error is present. Investors should, when ...

  • The Trend is Our Friend: Risk Parity, Momentum and Trend Following in Global Asset Allocation (2014)

    The authors of this paper examine the effects of trend application methodologies when applied to global asset allocations amongst commodities, bonds and real estate. Trend following application offers a significant improvement, in comparison to traditional buy-and-hold portfolios, to risk-adjusted performance. It is also a method of asset allocation superior to risk parity. A ...

    • Quantitative
    • Views: 1232
    Read more
  • Robeco

    Applying factor investing to corporate bonds (Robeco, 2018)

    Although much factor research focuses on the equity market, the concept and benefits of factor investing apply equally well to the corporate bond market.

    Speed read

    • Increasing evidence to support factor investing in corporate bonds
    • Allocation to multiple factors reduces relative risk; enhancing factors improves performance
    • Multi-asset ...

  • CFA Institute

    What Free Lunch? The Costs of Overdiversification (CFA Institute, 2017)

    Institutional investors, charged with outperforming a policy benchmark, often allocate to external active managers in order to hit their return objective. The challenge is to do so without over-diversifying the plan. Hiring too many managers can significantly reduce active risk, leaving the plan with high fees and limited ability to outperform a policy benchmark. In this paper, we ...

    • Professional
    • Views: 1621
    Read more
  • Axioma

    For Style Factors, One Size Does Not Fit All (Axioma, 2017)

    Investors may need to vary between using local and regional models, if using factors for alpha generation. They should pay attention to pure risk factors; and 'alpha factor users' should not panic when returns to factors go negative, nor should they expect the good times to last forever.

  • QMA

    The Long and the Short of It: The Quant Shorting Advantage (QMA)

    • 01 Dec 2017
    • Company: QMA

    Active extension, equity long-short, and equity market neutral products can be attractive for investors at any particular time, given investors' varied investment objectives and needs. That said, each of the three categories of shorting-enabled products can help address distinct issues facing investors today. QMA’s paper describes how short selling can allow investors to ...

    • Introductory
    • Views: 1707
    Read more
  • Credit Suisse

    Looking for Easy Games: How Passive Investing Shapes Active Management (Credit Suisse, 2017)

    Investors are shifting their investment allocations from active to passive management. This trend has accelerated in recent years. The investors who are shifting from active to passive are less informed than those who stay. This is equivalent to the weak players leaving the poker table. Since the winners need losers, this can make the market even more efficient, and hence less ...