Maximum drawdown, the largest cumulative loss from peak to trough, is one of the most widely used indicators of risk in the fund management industry, but one of the least developed in the context of measures of risk. We formalize drawdown risk as Conditional Expected Drawdown (CED), which is the...

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...

We provide a data-driven adjustment for estimated betas that leads to material improvements in the accuracy of weights and risk forecasts for minimum variance portfolios. Like the widely used Blume 2/3 rule and Vasicek correction developed in the 1970s, our beta adjustment operates by shrinking...

A nonparametric analysis of player plate appearances (PA) in the 2018 Major League Baseball (MLB) season provides no evidence of a batter hot hand. Players with more than 100 PAs in the 2018 season are analyzed using one-sided permutation tests stratified by player. Based on recent literature,...

We use supervised learning to identify factors that predict the cross-section of maximum drawdown for stocks in the US equity market. Our data run from January 1973 to December 2018 and our analysis includes ordinary least squares, penalized linear regressions, tree-based models, and neural...

We examine the tax efficiency of an indexing strategy and six factor tilts. Between June 1995 and March 2018, average value added by tax management exceeded 1.4% per year at a 10- year horizon for all the strategies we considered. Tax-managed factor tilts that are beta 1 to the market generated...

Portfolio risk forecasting has been and continues to be an active research field for both academics and practitioners. Almost all institutional investment management firms use quantitative models for their portfolio forecasting, and researchers have explored models' econometric foundations,...

A multi-name credit derivative is a security that is tied to an underlying portfolio of corporate bonds and has payoffs that depend on the loss due to default in the portfolio. The value of a multi-name derivative depends on the distribution of portfolio loss at multiple horizons....

Risk-averse investors in credit sensitive securities such as equity and bonds require compensation for bearing exposure to non-diversifiable corporate default risk. One component of this compensation is an event premium for the abrupt changes in security prices that occur at default. While...

This paper analyzes a family of multivariate point process models of correlated event timing whose arrival intensity is driven by an affine jump diffusion. The components of an affine point process are self- and cross-exciting, and facilitate the description of complex event dependence...