A number of techniques have been proposed to measure portfolio performance and to distinguish between performance due to forecasting security-specific returns and performance due to forecasting market-wide events. We show theoretically and empirically that it is possible to construct portfolios...

Asset allocation is at the heart of every portfolio construction process and crucial to its success. Though as diverse as they are innovative, the approaches used to pinpoint the optimal mix of assets mostly have common roots. In the following paper, we address this commonality in depth. First,...

Since Shalit and Yitzhalit (1984) the Mean-Extended Gini (MEG) has been proposed as a workable alternative to the classical Markowitz mean-variance CAPM. Although MEG keeps under control the risk belonging to the left-tail of the return distribution, small attention is reserved to potential...

Recent literature indicates that a liquidity investment style – the process of investing in relatively less liquid stocks within the liquid universe of publicly traded stocks – has led to excess returns relative to size and value. While previously documented at the security level, we examine...

Target-Date Funds (TDFs) facilitate retirement planning by varying asset allocation over time with the goal of reducing portfolio risk. We explore potential agency problems in TDFs by examining their return performance and flow-performance relation. We find that TDFs under-perform balanced funds...

This paper presents an option positioning that allows us to infer forward variances from option portfolios. The forward variances we construct from equity index options help to predict (i) growth in measures of real economic activity, (ii) Treasury bill returns, (iii) stock market returns, and...

This paper combines the use of portfolio holdings data and Principal Component Analysis to create synthetic fund indexes. Synthetic funds are funds portfolios which aim to duplicate a fund market in order to represent alternative benchmarks to compare the performance of investment funds. Our...

Passive investing, particularly in emerging markets, has become an increasingly popular means of quick, “diversified” exposure to a particular segment of the markets. Defensive investors, as Benjamin Graham noted, would be best served owning a diversified list of leading companies. Yet it's...

The correlation of returns for various equity asset classes has been high. In addition, the range or "dispersion" of returns across asset classes - and across sectors within those asset classes - has been low. These factors have made it difficult for active managers to outperform. But dispersion...

There is growing consensus that Target Date Funds (TDFs) represent a "better" solution for retirement investing than traditional strategic portfolios like a 60/40 equities/bonds. While much marketing material hints at the fact that TDFs may provide a "safer" or "less risky" solution for...