This paper studies the persistence of mutual fund performance. Academic research often focuses on fund returns, sometimes adjusted for style and market cap biases. Because fund rating systems play a central role in the asset management industry, we consider another approach in this paper. Using...

The mean-variance optimization (MVO) theory of Markowitz (1952) for portfolio selection is one of the most important methods used in quantitative finance. This portfolio allocation needs two input parameters, the vector of expected returns and the covariance matrix of asset returns. This process...

The capital asset pricing model (CAPM) developed by Sharpe (1964) is the starting point for the arbitrage pricing theory (APT). It uses a single risk factor to model the risk premium of an asset class. However, the CAPM has been the subject of important research, which has highlighted numerous...

Research in hedge fund investing proposes different solutions to build optimal hedge fund portfolios. However, these solutions are direct extensions of the usual meanvariance framework, and still suffer from model risks. More complex approaches start to be used but are related to numerous...

Risk parity is an allocation method used to build diversified portfolios that does not rely on any assumptions of expected returns, thus placing risk management at the heart of the strategy. This explains why risk parity became a popular investment model after the global financial crisis in...