This paper describes an empirical study of shortfall optimization with Barra Extreme Risk. We compare minimum shortfall to minimum variance portfolios in the US, UK, and Japanese equity markets using Barra Style Factors (Value, Growth, Momentum, etc.). We show that minimizing shortfall generally...

Risk-only investment strategies have been growing in popularity as traditional investment strategies have fallen short of return targets over the last decade. However, risk-based investors should be aware of four things. First, theoretical considerations and empirical studies show that...

The purpose of this paper is to study the notion of consistency of choice independent of the particular choice model at hand. Consistency is viewed as an inherently logical concept that is fundamentally void of connotation and is thus disentangled from traditional rationality or consistency...

We present evidence that sustainability is inextricably linked with market-implied uncertainty and sentiment. We derive an econometric decomposition of sustainability ratings yielding three orthogonal components capturing uncertainty, investor sentiment, and an idiosyncratic sustainability...

Diversification is a fundamental concept in economics, decision theory and finance. It also lies at the core of the Darwinian evolution argument, and diversifying behavior known as bet-hedging has been widely documented in other species. The central premise of this paper is that attitudes...