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Informed Traders, Long-Dated Options, and the Cross Section of Stock Returns

Clements, Mark - 2017

-dated options contain all the information relevant for predicting returns. Information, however, shifts towards short-dated options … when an earnings announcement is imminent and when options are cheap to trade. The difference between short- and long …-dated options also predicts the timing of merger announcements. Our results are consistent with option prices reflecting the actions …

Persistent link: https://www.econbiz.de/10012946867

Why Factor Tilts are Not Smart 'Smart Beta'

Arnott, Robert D. - 2017

We challenge the common view that smart beta strategies and factor tilts are equivalent. Initially, the term “smart beta” referred to strategies that broke the link between the price of a stock and its weight in the portfolio or index. Capitalization weighting does not do that — neither...

Persistent link: https://www.econbiz.de/10012947269

To Win with 'Smart Beta' Ask If the Price is Right

Arnott, Robert D. - 2017

In our paper — “How Can ‘Smart Beta' Go Horribly Wrong?” — we show, using U.S. data, that the relative valuation of a strategy (in comparison with its own historical norms) is correlated with the strategy's subsequent return at a five-year horizon. The high past performance of many of...

Persistent link: https://www.econbiz.de/10012947270

The Incredible Shrinking Factor Return

Arnott, Robert D. - 2017

This is the first in a series of papers we will publish in 2017 that demonstrate factor tilts generally deliver far less alpha in live portfolios than they do on paper, or put another way, investment managers generally fail to capture the returns that would be expected based on their factor...

Persistent link: https://www.econbiz.de/10012947271

Timing 'Smart Beta' Strategies? Of Course! Buy Low, Sell High!

Arnott, Robert D. - 2017

Persistent link: https://www.econbiz.de/10012947276

Forecasting Factor and Smart Beta Returns (Hint : History Is Worse than Useless)

Arnott, Robert D. - 2017

In a series of papers we published in 2016, we show that relative valuations predict subsequent returns for both factors and smart beta strategies in exactly the same way price matters in stock selection and asset allocation. To many, one surprising revelation in that series is that a number of...

Persistent link: https://www.econbiz.de/10012947277

Can Momentum Investing Be Saved?

Arnott, Robert D. - 2018

On paper, momentum is one of the most compelling factors: simulated portfolios based on momentum add remarkable value, in most time periods and in most asset classes, all over the world. So, our title may seem unduly provocative. However, live results for mutual funds that take on a momentum...

Persistent link: https://www.econbiz.de/10012930650

Model Risk for Market Risk Modeling

Hsu, Jason C. - 2016

in posterior distributions with high degrees of skewness and kurtosis. If we accept a simple world of time …

Persistent link: https://www.econbiz.de/10013008923

Risk-Managing the Uncertainty in VAR Parameters

Hsu, Jason C. - 2016

Managing risk successfully requires a detailed understanding of the distributions from which random shocks to asset prices are drawn. However, there is uncertainty in both the actual distribution of returns and the parameters characterizing the distribution. In this chapter, we focus on the...

Persistent link: https://www.econbiz.de/10013008927

Mitigating the Hidden Risks of Factor Investing

Arnott, Rob; Kalesnik, Vitali; Wu, Lillian J. - 2022

Factor investing has been around for several decades, backed by an enormous body of literature, and yet it is still surrounded by much confusion and debate. Some of the rhetoric and myths have existed for a long time, while others have arisen in response to the difficult performance from 2018 to...

Persistent link: https://www.econbiz.de/10014255296