Risk and Portfolio Construction - Articles & White Papers
White papers and articles on portfolio construction and risk management for investment managers. Maintaining an appropriately diversified portfolio, managing portfolio risk, and controlling the risk/reward characteristics of a fund are essential basics for money managers. Academic papers on portfolio optimization are particularly helpful in this regard. The most frequently downloaded... research in this section relates to reports on measuring investment risk, for instance: analysis of the time horizon over which risk is best estimated, and using risk factors as building blocks for portfolio diversification. Papers on tracking error have been well received as have papers on tail risk and fat tails. A number of articles in this section argue the case for concentrated portfolios and a need for more active management. Surveys on risk management and risk management systems have proved popular, enabling members to understand the risk practices employed by their peers. Other research on portfolio risk in this section includes papers on low volatility investing, equity risk premia, risk parity, models for forecasting asset class risk and the capital asset price model (CAPM).
The average monthly premium of the Market return over the one-month T-bill return is substantial, as are average premiums of value and small stocks over Market. As the return horizon increases, premium distributions become more disperse, but they move to the right (toward higher values) faster than they become more disperse…
In this research paper, we explore the effectiveness of overlaying earnings revision strategies on traditional fundamental value and quality factors across seven Pan Asian markets—Australia, China, Hong Kong, India, Japan, South Korea, and Taiwan—between March 31, 2006, and March 31, 2018.
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…
Long-term investors often passively track a strategic asset allocation benchmark whose weights across the various asset classes remains constant over a multi-year horizon (usually 10, 15 years, or longer). Specialist teams, internal or external, may be setup to add an active overlay portfolio in the form of a tactical asset…
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.
It seems like investment managers everywhere are rushing to put a risk factor spin on their investment processes. But what exactly are the advantages of using risk factors rather than asset classes? Is it time to box up your traditional asset classes and put them in the attic so one day you can show future generations how we…
The Solvency II Directive (2009/138/EC) imposes a specific solvency capital charge on currency mismatches between insurance companies’ assets and liabilities. Most insurers choose to hedge the bulk of their foreign-currency exposures unless they hold a particularly strong view on currency valuations, but a 100% hedge will…
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.
This quarter’s Hedge Fund Monitor looks at the three primary options-based strategies that institutional investors can use to shape their risk: buying insurance, selling insurance, or otherwise trading insurance to capture mispricings of these contracts.
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…
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…
Over the past decade, the financial industry has made substantial progress in strengthening global market stability and enhancing resilience. Despite significant efforts to improve post-crisis resilience, this paper identifies additional opportunities to further strengthen financial stability through enhanced system-wide…
Investors looking for returns in fintech should focus on the A-G of developments, Robeco’s trends experts say in a new white paper, ‘Fintech 2.0: From trends to insights’. This updates a previous work on how financial technology is revolutionizing how we conduct banking, consumer payments and financial services.
After last month’s sudden upward jolt, the S&P/JPX JGB VIX kicked off August at intramonth high levels. The conclusion of the Bank of Japan’s (BoJ) July meeting immediately sent the 10-year JGB yields tumbling lower, but they quickly started to rise again, as the market clearly wanted to test the central bank’s comfort…
