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Wednesday, August 15, 2018
A recent MarketWatch piece cited a talk in Hong Kong by Economics Nobel Prize winner Professor Robert Merton wherein he discussed the challenges of evaluating investment managers. The following article assumes that the above summary of Professor Merton’s talk is […]
Rapid asset flows into smart beta strategies have led to concerns about froth and a vigorous debate among systematic portfolio vendors. At the same time, few discussions of smart beta crowding are burdened by data on the aggregate risk of smart […]
Whereas hedge fund crowding primarily consists of systematic factor bets, most analysis of hedge fund crowding focuses solely on popular positions. Moreover, such analysis usually assumes that hedge fund crowding in individual stocks is a bullish indicator. This article illustrates […]
The proliferation of smart beta strategies has raised questions about the relationship between the core risk factors that have formed the foundation of quantitative investment analysis for decades and the growing factor zoo of strategies. Whereas some state that “smart […]
A typical analysis of hedge fund crowding considers large, popular, and concentrated hedge fund long equity holdings. Such analysis usually assumes that crowding comes from stock-specific bets and that it is a bullish indicator. These assumptions are incorrect and have […]
And What They Owned at Year-end Though 2016 was a poor year for most institutional portfolio managers, it was a satisfactory year for the most skilled ones. Security selection returns of the top U.S. stock pickers in 2016 were positive. […]
A typical analysis of hedge fund crowding surveys popular equity holdings. Yet, such residual, idiosyncratic, or stock-specific bets account for only 31% of current hedge fund crowding. Factor (systematic) risk, rather than a few specific stocks, is driving absolute and […]
Whereas most analysis of hedge fund crowding focuses on individual stocks, over 85% of hedge funds’ recent long equity variance has been due to their factor (systematic) risk. Residual, idiosyncratic, or stock-specific bets accounted for less than 15%. Thus, factor […]
Though many smart beta ETFs do provide valuable exposures, others mainly re-shuffle familiar dumb beta factors. Our earlier article showed that traditional, or dumb, Market and Sector Betas account for over 92% of monthly return variance for most U.S. equity […]
Our earlier articles discussed how some smart beta strategies turn out to be merely high beta strategies, and how others actively time the market, requiring careful monitoring. We also showed that the returns of popular factor ETFs such as Momentum […]
