Many years ago, the authors demonstrated that there is much greater dimensionality to the stock market than is suggested by the one-factor capital asset pricing model. Investors today continue to underestimate the market's dimensionality through their recent embrace of “smart beta”...

When faced with the challenge of forming a portfolio containing a risky and a risk-free asset, investors tend to apply the same portfolio weights independently of the volatility of the risky asset. This “percentage heuristic” can lead to different levels of portfolio risk when the same...

Institutional investors delegate 85% of their alternative investments to external managers and funds-of-funds. Institutions using financial intermediaries have higher costs and underperform institutions investing internally in real assets, private equity, and hedge funds. Large investors rely...

Popular conceptions of long–short investing are distorted by a number of myths, many of which appear to result from viewing long–short from a conventional investment perspective. Long–short portfolios differ fundamentally from long-only portfolios in construction, in the measurement of...

Numerous academic studies have shown that asset allocation is the single most important determinant of portfolio returns. We accept this premise but note that an optimal asset allocation strategy must still be determined based on dynamic conditions. Using the principles of intermarket analysis...

We present the optimal consumption and investment strategy for an investor,endowed with labor income, searching to maximize utility from consumption and terminalwealth when facing a binding capital constraint of a European (constraint on terminal wealth)or an American (constraint on the wealth...

For centuries, wealthy individuals and institutions have collected and consumed art for aesthetic pleasure. While anecdotal evidence suggests that some artworks have appreciated in value over time, few studies have documented investment returns in art systematically. In this article, we...

This paper surveys the literature that deals with the informational content of market option prices for the purposes of quantitative asset management. We review studies that have investigated whether market option prices may help a portfolio manager in the stock selection process, portfolio...

Determining whether investment strategies exist that provide higher (risk-adjusted) returns than buying and holding the S&P 500 stock market index is not only highly relevant for finance theory, but also for the asset management industry. This study conducts a comprehensive test using realistic...

Factor strategies in equity portfolio management come with high portfolio turnover. In this paper we propose a rebalancing strategy that balances transactions costs with the expected return contribution of the desired portfolio transaction. We follow score-based factor strategies, that sort...