Asset returns in efficient markets should not display serial correlations. Otherwise, asset prices would be predictable to a certain extent and arbitrage opportunities would appear, contradicting the assumption of efficiency.Lack of serial correlation is considered to be true for most...

We provide first empirical evidence of the long-term realized performance of alternative beta strategies. Despite diversified risk premia portfolios achieving satisfactory Sharpe ratios of 0.80 – 1.07 over the past decade, we show that up to two thirds of the performance can be explained by...

We use learning in an equilibrium model to explain the puzzling predictive power of the volatility risk premium (VRP) for option returns. In the model, a representative agent follows a rational Bayesian learning process in an economy under incomplete information with the objective of pricing...

This paper proposes a machine learning approach to building investment strategies that addresses several drawbacks of a classic approach. To demonstrate our approach, we use a logistic regression algorithm to build a time-series dual momentum trading strategy on the S&P 500 Index. Our algorithm...

Black-Litterman model provides a reasonable platform to portfolio optimization and asset allocation by presenting an equilibrium state of the markets and only deviating from that equilibrium state with forward-looking strategic views. Index of Economic Freedom (IEF) can be used as a handy tool...

The sources of risk in a marketplace are systematic, cross-sectional and time-varying in nature. Though the CAPM provides an excellent risk-return framework and the market beta may reflect the risk associated with risky assets, there are opportunities for investors to take advantage of...

Continuously rebalanced long-short trades are similar to highly levered trades in that their PNL profile depends not only on the final distribution of return, but also on the realized co-variance structure of the asset pair. It's easily possible for both orientations of a rebalanced long-short...

The study examines the predictability of 48 sovereign bond markets based on a strategy of 27,000 technical trading rules. These rules represent four popular trading rule classes, they are: moving average, filtering, support and resistance, and channel breakout rules, with numerous variants in...

We first document that each trading day the U.S. Treasury notes have a large proportion of zero returns. This is because almost all trades are executed at the best ask or bid quote and quoted spreads are mostly set close to the minimum tick. The proportion of zero returns is negatively...

The looming Savings Crisis is usually attributed to people either not saving enough or making poor investment choices, but we believe there's another culprit. Many investors could benefit from a 'free lunch' of pooling their longevity risk with others, but due to market inefficiencies, they do...