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.
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…
Berkshire Hathaway has realized a Sharpe ratio of 0.79 with significant alpha to traditional risk factors. However, the alpha becomes insignificant when controlling for exposures to Betting-Against-Beta and Quality-Minus-Junk factors. Further, we estimate that Buffett’s leverage is about 1.7-to-1 on average. Therefore,…
This paper examines the performance of actively managed funds on a risk-adjusted basis.
Modern portfolio theory (MPT) states that expectations of returns must be accompanied by risk or variation around the expected return. It assumes that higher risk should be compensated, on average, by higher returns. Beyond…
This paper by Amundi Asset Management uses financial and macroeconomic variables to predict currency returns, by using a two-step procedure. The first step consists of a cointegration equation that explains the exchange rate level as a function of global and domestic financial factors. The second step estimates an error-…
By virtue of their lack of investment constraints relative to traditional equity and fixed income managers, hedge funds have produced positive, diversifying returns for more than 20 years. Investors have therefore used hedge funds to complement core equity and fixed income allocations with the expectation that this will…
The current approaches and products of quantitative equity investing stand on the shoulders of major theoretical and empirical contributions in financial economics. At the root of disciplined, modern investment processes are two intuitive concepts: risk and return. This report provides an introduction to these two concepts,…
Pitched at an introductory level, this podcast centres around a series of in-depth conversations with experts from State Street Global Advisors with the aim of bringing investment processes to life.
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.
The number of equity multifactor funds has mushroomed. In this paper, we present a framework to help investors better understand these funds' approaches to portfolio construction and set realistic expectations. To bring this framework to life, we apply it to a selection of multifactor funds in a series of fund profiles.
The authors of this paper analyse the relative advocacy of competing approaches for the combination of investment signals in long/short portfolios. Specifically, they study if it is preferable to (1) calculate weights for individual signals and then combine those weights (Mixed); or (2) combine signals and then calculate…
This issue compares factor investing to the two other common investment approaches: traditional alpha strategies and market cap-weighted indexing. We argue that each of these three distinct investment approaches has its own merits and purposes and that, by understanding these differences, investors can make more informed…
Getting the right balance between public and private equity is vital to building the right portfolio. Our research helps improve the accuracy of allocating between the two.
This paper by Axioma examines the impact of increasing levels of constraints on the risk profile and performance of a global Value portfolio. The authors compare the results with two other types of strategies that, in the interest of keeping the size of the papers manageable, will be detailed separately: global Value and…
This paper by Axioma examines the impact of increasing levels of constraints on the risk profile and performance of a global Value portfolio. The authors compare the results with two other types of strategies that, in the interest of keeping the size of the papers manageable, will be detailed separately: global Low…
This paper by Axioma examines the impact of increasing levels of constraints on the risk profile and performance of a global Momentum portfolio. The authors compare the results with two other types of strategies that, in the interest of keeping the size of the papers manageable, will be detailed separately: global Low…
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…
In the earliest days of empirical work in academic finance, the size effect was the first market anomaly to challenge the standard asset pricing model and prompt debates about market efficiency. The notion that small stocks have higher average returns than large stocks, even after risk-adjustment, was a pathbreaking…
There are many reasons an investor may seek dedicated exposure to a specific sector of the equity markets. These reasons include, but are not limited to, diversification benefits via uncorrelated sources of return, and the belief that certain sectors contain more potential for alpha when compared to the overall market. In…
