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.
Gestalt University’s latest guest has emerged as one of these trusted sources. His Epsilon Theory portal is one of the most respected and widely read information outlets in financial media. A prolific writer with a background in applied statistics and game theory, his acute understanding of history and behavioral analysis have equipped him with the right tools to shed light onto the real forces that guide The Narrative Machine. He is, of course, Dr Ben Hunt.
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.
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).
We explore the mirror concepts of fragility & robustness using a slimmed-down version of the Newfound/ReSolve Robust Equity Momentum Index.
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 …
Hot off the press, a new paper by Guido Baltussen, Laurens Swinkels and Pim van Vliet at Dutch quant powerhouse, Robeco, covers global multi-asset factor premiums over an unprecedented sample of 217 years. We thought the topics and findings were important and timely...
We’ve spent a great deal of time in past articles discussing the merits of portfolio optimization. In this article we will examine the merits and challenges of portfolio optimization in the context of one of the most challenging investment universes: managed futures.
Our whitepaper “The Optimization Machine: A General Framework for Portfolio Choice” presented a logical framework for thinking about portfolio optimization given specific assumptions regarding expected relationships between risk and return. We explored the fundamental roots of common portfolio …
The goal of this article is to illustrate how seemingly inconsequential changes to the trading mechanics of a strategy, which have little impact on the long-term expected performance, can have a material impact on results in the short-term.