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.
Keep ReadingMiscellaneous
Empirical Finance: Meeting Fiduciary Standards Through Skepticism, Not Cynicism
We firmly believe that the scientific process is alive and well in empirical finance, and that HLZ’s guidelines are an excellent example of the process at work. Financial practitioners should evaluate research with a healthy skepticism, and an awareness of the implications of data mining.
Keep ReadingAll Strategies Blow Up
We are a quantitative finance shop, right down to the ground. All of our portfolios are driven by supervised quantitative models with no discretionary intervention. As such, I was inspired to respond to a recent article on the risk of quant strategies, as I think the way our team approaches quantitative research diverges from how many outsiders perceive quant, and also from how many quantitative shops work.
Keep ReadingWinning By Not Losing: Bootstrap Quantile Clouds
For most investors, financial risk is singularly defined as the probability of not reaching financial goals. As such, the sole objective of investing is to minimize this risk.
Keep ReadingThe Narrative is Reality
Back in the days when I still thought markets were driven by fundamentals I used to be a big fan of Don Coxe’s monthly commentaries. Don was at the epicenter of the commodity / BRIC narrative, and his commentaries were dense with historical context, pithy quotes, and compelling analysis.
Keep ReadingYour Alpha is My Beta
The goal of this missive was to demonstrate that, when it comes to alpha, where you stand depends profoundly on where you sit. Different investors with varying levels of knowledge, experience, access, and operational expertise will interpret different products and strategies as delivering different magnitudes of value added. At each point, an investor may be theoretically ‘better off’ from adding even simple strategies to the mix, perhaps at lower fees, and even after a guiding Advisor extracts a reasonable fee on top. More experienced investors may be able to harness a broader array of risk premia directly, and thus be willing to pay for a smaller set of more exotic risk premia. It turns out that ‘alpha’ is a remarkably personal statistic after all.
Keep ReadingDow 20,000: Is 2015 the Year?
It’s that time of year again. Yup, that jolly, happy time of year when the soothsayers of Wall Street start trumpeting their views on what’s going to happen in 2015, and how to position portfolios to profit.
Keep ReadingA Century of Generalized Momentum
We enjoy collaborating on new research projects simply because nobody has a monopoly on interesting ideas. Where our expertise in asset allocation, tactical strategies and portfolio optimization methods might prove useful, we are always open to discussing new and ongoing research.
Keep ReadingFactors: An Essential Part of Any Nutritious Portfolio
We recently posted a piece on factor investing (here) so we were thrilled to have an opportunity to see Dr. Andrew Ang and Don Raymond discuss factor investing at a seminar in Toronto last week. Dr. Ang is Ann F. Kaplan Professor of Business and Chair of the Finance and Economics Division at Columbia Business School, while Dr. Raymond is Adjunct Professor of Finance and past Chair of the International Centre for Pension Management at University of Toronto’s Rotman School of Business.
Keep ReadingForget active vs. passive. It’s all about factors
We just love a good debate, and there seems to be quite a heated debate at the moment about the relative utility of passive versus active investing. Perhaps this debate is as timeless as investment management itself, but a flurry of recent studies may have finally armed passive advocates with enough ammunition to settle the argument once and for all.
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