We consider the problem of filtering and control in the setting of portfolio optimization in financial markets with random factors that are not directly observable. The example that we present is a commodities portfolio where yields on futures contracts are observed with some noise. Through the...

Similar to the cross-sectional momentum crashes, the time series momentum experiences deep and persistent drawdowns in the stressed time of slumps in the upward momentum, rebounds in the downward momentum, and long time sideways market. We measure the upside and downside risk using the upper and...

We contrast the time-series and cross-sectional performance of three popular investment strategies: carry, momentum and value. While considerable research has examined the performance of these strategies in either a directional or cross-asset settings, we offer some insights on the market...

In this paper we study the asset-liability management of an insurance company selling “participating contracts”. Participating contracts are typical insurance policies sold worldwide.The payoff of a participating policy is linked to the portfolio or the surplus of the insurance company. We...

Ethanol has been the subject of intense debate following the adoption of the Energy Policy Act of 2005 (EPAct) which established that the gasoline supply in the United States (U.S.) must contain 10% ethanol. This work seeks to identify hedging ratios using dynamic multivariate GARCH to best...

We propose a new methodology for abnormal return detection and correction, and evaluate the economic impacts of outliers on asset allocations with higher-order moments (Cf. Jurczenko et al., 2008). Indeed, extreme returns and outliers greatly affect empirical higher-order moment estimations (Cf....

To capture the well documented time series momentum and reversal in asset price, we develop a continuous-time asset price model, derive the optimal investment strategy theoretically, and test the strategy empirically. We show that, by combining market fundamentals and timing opportunity with...

We introduce a simulation-free method to model and forecast multiple asset returns and employ it to investigate the optimal ensemble of features to include when jointly predicting monthly stock and bond excess returns. Our approach builds on the Bayesian Dynamic Linear Models of West and...

The asymmetry in the tail dependence between U.S. equity portfolios and the aggregate U.S. market is a well-established property. Given the limited number of observations in the tails of a joint distribution, standard non-parametric measures of tail dependence have poor finite-sample properties...

I decompose the expected return difference between cross-asset time series momentum and time series momentum into market timing and risk premium components, and show that market timing accounts for 71–79% of the difference. I thus show that two recent critiques of time series momentum do not...