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Maximizing the Rebalancing Premium: Why Risk Parity portfolios are much greater than the sum of their parts
We examine the distribution of rebalancing premiums for a simple risk parity implementation (a version of the Permanent Portfolio) consisting of US stocks, gold and bonds from 1982 through May 2020. We then proceed to analyze historical and expected future rebalancing premia for a variety of global risk parity strategies ..
Are We Living in a Post-Factor World?
In some ways new investment concepts are like any new technology. The progenitors of any early technology typically earn extraordinary profits until competition heats up. Eventually competition drives down profit margins and the technology becomes commoditized. But investment technology has a special quality that arises from…
Novel Price Estimator Guaranteed to Produce Non-Negative Prices
The following report was produced by our research team and we felt it was worth sharing for discussion and comment. The recent price action in crude oil prompted us to spend a little effort thinking about how to manage around negative prices.
Portfolio Optimization for Efficient Stock Portfolios:
Applications and Directions
We compared risk-efficient portfolios with cap-weighted and equal-weighted portfolios of liquid large-cap stocks from 1960 through 2019. We also take steps to limit turnover and tax consequences by trading overlapping monthly portfolios with annual holding periods.
Risk Parity in the Time of COVID
Consistent with misapprehensions expressed during other recent market crises, there has been a chorus of alarmist speculation about the actions and state of risk-parity strategies during the current crash. We felt it would be helpful to revisit the concept of risk parity and take a snapshot of how a typical global risk parity strategy might have been expected to behave this year.
Tactical Strategies and The Anatomy of A Bear Market
The last few weeks have been some of the toughest in recent memory for investors, as we have observed an intense global market selloff that began in late February and continued into early March of 2020 (as of the writing of this report).
From Fragility to Robustness: The Value of Ensembles
A Case Study in Robust Equity Momentum
We explore the mirror concepts of fragility & robustness using a slimmed-down version of the Newfound/ReSolve Robust Equity Momentum Index.
Global Equity Momentum: A Craftsman’s Perspective – Executive Summary
Quantitative investment researchers often seek uniquely optimal parameterizations of their strategies amongst a broad “robust” region of parameter choices. However, this ignores a critically important feature of investing – Diversification. By diversifying across many equally legitimate parameter choices – an ensemble – investors may …
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