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.
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,…
What, Exactly, Is a Factor? According to BlackRock, as of June 2018 there was $1.9 trillion invested in factor-based strategies—a figure expected to grow by nearly 80% to $3.4 trillion by 2022. There is no question that these strategies have moved to the forefront of investing, but their growing popularity begs the basic…
Can Strategic Asset Allocations Adapt to Markets? Investors in strategic asset allocation models aren’t immune to market drawdowns. This paper shows a path for potentially changing this experience. By using variable beta strategies, portfolio managers can make their allocation models more dynamic without changing their long-…
Can Strategic Asset Allocations Adapt to Markets? Investors in strategic asset allocation models aren’t immune to market drawdowns. This paper shows a path for potentially changing this experience. By using variable beta strategies, portfolio managers can make their allocation models more dynamic without changing their long-…
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…
Climate change is a subject that has been largely addressed from both macroeconomic and energetic standpoints. Integration of climate variables and natural capital into the traditional economic framework can appear conflicting with the notion of infinitely growing economies exploiting finite resources, which questions the…
In this article, the authors document robust momentum behavior in a large collection of 65 widely-studied, characteristic-based equity factors around the globe. They show that, in general, individual factors can be reliably timed based on their own recent performance. A time series “factor momentum” portfolio that combines…
This 38-page report has been produced by the American Academy of Actuaries Pension Practice Council. It explains how pension actuaries select or recommend an expected investment return assumption or assess capital market models from an outside party, and may also facilitate discussion with investment professionals to better…
Quantitative investment managers experienced significant and wide-ranging underperformance in 2018. The performance of Alternative Risk Premia (ARP) strategies, which claim to offer broad diversification across distinct economic drivers and to be lowly correlated to equity markets, was particularly poor. Because of their…
The concept of factor investing and the debate around passive and active management has emerged since the end of the 2000s and has completely changed the landscape of equity investing. Today, institutional investors structure their strategic equity allocations essentially around risk factors. Size, value, low beta, momentum…
This article develops the theory of risk budgeting portfolios, when we would like to impose weight constraints. It appears that the mathematical problem is more complex than the traditional risk budgeting problem. The formulation of the optimization program is particularly critical in order to determine the right risk…
This paper contains the statistics of a survey about the Risk-Free Rate (RF) and the Market Risk Premium (MRP) used in 2019 for 69 countries. We got answers for 84 countries, but we only report the results for 69 countries with more than 8 answers.
Fallen Angel risk results from the possibility and price impact of bond downgrades from investment grade (IG) into high yield (HY). We find that the price deterioration experienced by bonds of future Fallen Angels is significantly greater than the price deterioration experienced by bonds of future IG downgrades on average.…
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…
We examine the tax efficiency of an indexing strategy and six factor tilts. Between June 1995 and March 2018, average value added by tax management exceeded 1.50% per year at a 10-year horizon for all the strategies we considered. Tax-managed factor tilts that are beta 1 to the market generated average tax alpha between 1.59…
In this compendium publication, the CFA Institute Research Foundation summarizes and provides links to the best reports that were produced and subsequently added to the Global Body of Investment Knowledge in 2018.
Our quarterly perspective on the current stability of the global equity markets using five reliable indicators of equity market strain. This quarterly report assesses the stability of five equity markets:
Our quarterly perspective on the current stability of the global equity markets using five reliable indicators of equity market strain. This quarterly report assesses the stability of five equity markets:
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