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.
In this paper for the Journal of Portfolio Management, Robert D. Arnott, Denis B. Chaves, and Tzee-man Chow examine the interplay that exists between the Shiller P/E ratio and the macroeconomy.
This report provides detailed descriptions, including over 550 mathematical formulas, for over 150 trading strategies across a host of asset classes (and trading styles). This includes stocks, options, fixed income, futures, ETFs, indexes, commodities, foreign exchange, convertibles, structured assets, volatility (as an…
The authors propose a practical technique to correct for survivorship bias across return distributions for investment product universes. The technique is designed to work efficiently in a large-scale performance measurement environment. It uses all available data for survivors and non-survivors, corrects for bias across the…
See how the S&P Risk Parity Indices use futures to represent multiple asset classes and attempt to reflect the risk/return characteristics of funds offered in the risk parity space.
In this 36-page paper, the authors calculate the factor exposures of selection and weighting (S&W) portfolios and then replicate those factor exposures using the FTSE Russell factor tilt methodology. This allows them to construct competing factor tilt portfolios that are substantially different in terms of construction…
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…
Traditional portfolio optimization processes have several well-known shortcomings. Consequently, investors often significantly constrain the optimization, resulting in little new information. One solution to overcome these limitations is a Step Optimization routine. In this paper, we will discuss how visualizing changes to…
Each quarter we share our 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: • Global Equities • Non-U.S. Equities • U.S. Equities • European Equities • Emerging Markets Equities Our…
Each quarter we share our 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: • Global Equities • Non-U.S. Equities • U.S. Equities • European Equities • Emerging Markets Equities Our…
To analyse credit risks with greater precision, we developed a pricing model last year to capture the influence of environmental, social and governance (ESG) factors on credit spreads. It showed a convincing relationship between ESG risk and credit spreads, manifesting as an ESG-risk curve. After expanding this research, we…
In multi-period trading with realistic market impact, determining the dynamic trading strategy that optimizes expected utility of final wealth is a hard problem. In this paper we show that, with an appropriate choice of the reward function, reinforcement learning techniques (specifically, Q-learning) can successfully handle…
Initially factor investing was primarily popular in the equity domain, but the same forces that make factor investing work for equities – investor behavior, market constraints and regulations – are also applicable to other asset classes. In this paper we present a number of client cases that illustrate different rationales…
Currency-hedged strategies attempt to eliminate the additional volatility that exchange rates impose on foreign assets. But this benefit comes with some trade-offs. Hedging currency risk has additional costs and can have tax implications. This paper starts with a brief review of the nature of currency risk. We use historic…
Like all investors, sustainable investors juggle various motivations: improving investment performance, achieving an economic or a societal outcome, and investing in ways consistent with their values/beliefs. The challenge for sustainable investment professionals is to understand their clients’ motivations and then shape…
This paper by Axioma describes an innovative portfolio-construction workflow that takes its return expectations directly from the results of a stress test.
One of the most critical tasks for the Government Pension Investment Fund (GPIF) is the proper selection and monitoring of fund managers. The asset owner's current approach, which depends on the track records and qualitative explanation of candidates and commissioned fund managers, can be significantly improved with the use…
This detailed 72-page paper has been authored by Amundi Asset Management. Its authors examine a number of challenges faced by robo-advisors, particularly automated portfolio allocation, the most important challenge for robo-advisory over the next five years, they argue.
The Global Industry Classification Standard, or GICS, is widely accepted as the definitive approach to categorising the equity universe into industry sectors. On September 28, the GICS Telecommunication Services sector will be renamed “Communication Services” and its remit will be broadened, increasing its size from around 2…
The trend in the world real interest rate for safe and liquid assets fluctuated close to 2 percent for more than a century, but has dropped significantly over the past three decades. This decline has been common among advanced economies, as trends in real interest rates across countries have converged over this period. It…
To help investors identify objectives-based funds and their peers, we recently augmented our Morningstar Institutional Categories with the more commonly used objectives-based fund types.
