Capital market assumptions (CMAs), which are long-term risk and return forecasts for asset classes, are important pillars of the investment industry. However, applying them reliably in portfolio construction has been (and still is) a challenge in the industry. Despite the difficulties, this...

There is a myriad of financial anomalies in the cross-section of equity returns. They have been widely studied in the literature, which gives investors a large choice in terms of investment styles. In this paper, the authors show a perhaps unappreciated quality of financial anomalies: they...

This material was presented at the Canadian Association of Alternative Strategies & Assets 2021 annual conference. It is based on the publish paper: Portfolio Tilts Using Views on Macroeconomic Regimes.Long-term investors tilt their portfolios given their views on the evolving investment...

This material was presented at the 3rd Frontiers of Factor Investing Conference at Lancaster, England.When assets' expected returns follow a factor structure subject to pricing errors, we show that the mean-variance portfolio can be used to obtain a set of implied factor risk premia. Contrary to...

This paper shows that financial covenants have no value for creditors of highly levered firms, because an attempt to enforce their rights in technical default would result in a lower payoff than continued operations under shareholders' control. This explains the widespread use of cov-lite loans...

DeMiguel et. al. (2009b) made a compelling case that estimation error dwarfs diversification benefits resulting in naive diversification (1/N) dominating mean-variance portfolios. We illustrate the necessary and sufficient conditions for risk-based allocation rules to be optimal in a...