Vol. 19, No. 1, 2021 Jason D. Fink and Kristin E. Fink While the outperformance of value relative to growth portfolios has been well established, there is still debate over whether this outperformance is the result of a systematic risk factor or a behavioral tendency. The distinction is crucial to determining the expected returns of value-… Read More
Articles
Lending to Lose: Who Buys Negatively Yielding Bonds and What it Means for Investors
Vol. 19, No. 1, 2021 Vineer Bhansali I discuss the demand and supply of negatively yielding bonds, which is a recent and relatively unprecedented phenomenon in financial markets. To understand why one would lend to lose, I classify buyers into three categories, i.e. “forced buyers”, “speculators” and “non-financial government entities”. I conclude that the demand for… Read More
Investment Style Volatility and Mutual Fund Performance
Vol. 19, No. 1, 2021 Keith C. Brown, W. V. Harlow and Hanjiang Zhang We develop a holdings-based statistic to measure the volatility of a fund’s investment style characteristic profile over time. On average, funds with lower levels of style volatility significantly outperform more style-volatile funds on a risk-adjusted basis. We show that style volatility has… Read More
Multi-Period Portfolio Selection: A Practical Simulation-Based Framework
Vol. 18, No. 4, 2020 Kenneth Blay, Anish Ghosh, Steven Kusiak, Harry Markowitz, Nicholas Savoulides and Qi Zheng The topic of optimal portfolio selection over time has garnered significant attention from investment researchers since the introduction of portfolio theory in 1952. While computational, theoretical, and numerical methods have advanced, solutions introduced to date have yet… Read More
What Drives Active Share? Active Stock Selection or Active Stock Weights
Vol. 18, No. 4, 2020 Aymen Karoui and Saurin Patel Active Share is a popular measure of active management. However, it is not clear what drives Active Share. To improve our understanding, we decompose Active Share into Active Stock Selection (ASE) and Active Stock Weights (ASW). ASE captures portfolio weights in stocks outside the portfolio… Read More
A Personal Tribute to Professor Harry Markowitz on the Occasion of the JOIM Special Achievement Award
Vol. 18, No. 4, 2020 A Personal Tribute to Professor Harry Markowitz on the Occasion of the JOIM Special Achievement Award View PDF… Read More
How Much Can Collective Defined Contribution Plans Improve Risk-Sharing?
Vol. 18, No. 4, 2020 Deborah Lucas and Daniel Smith Collective Defined Contribution (CDC) plans have been suggested as an attractive and sustainable alternative to public sector DB plans. A CDC plan is a hybrid structure, designed to provide more predictable retirement benefits than a traditional DC plan while operating at the lower cost of… Read More
A Six-Component Integrated Approach to Addressing the Retirement Funding Challenge
Vol. 18, No. 4, 2020 Robert C. Merton and Arun Muralidhar This paper offers an integrated approach to addressing the global retirement funding challenge, especially in light of the coronavirus shock that has created an unanticipated and unprecedented impact on lifetime income/consumption. It frames the problem in a six-component approach to the funding challenge with… Read More
Correlation Shrinkage: Implications For Risk Forecasting
Vol. 18, No. 3, 2020 Jose Menchero and Peng Li In this article, we study the impact of shrinking sample correlations toward zero. We find that while such shrinkage may be beneficial from a portfolio-construction perspective, there is virtually no benefit in terms of the accuracy of risk forecasts. In fact, we show that correlation… Read More
Is Sell-Side Research More Valuable in Bad Times?
Vol. 18, No. 3, 2020 Roger K. Loh and René M. Stulz Little is known about whether the value of sell-side research is different in bad times compared to good times. Because uncertainty is high in bad times, investors find it harder to assess firm prospects and hence should value analyst output more. However, higher… Read More