Strategy Risk vs Asset Risk

Alternative Title: How to Avoid Bad Manager Timing

Strategy Risk: If you own a black-box ‘go-anywhere’ hedge fund that invests long and short, uses futures and derivatives at any frequencies, you are mostly exposed to the strategy risk.

Asset Risk: On the other hand, if you buy and hold S&P500 for the long-run, you are mostly exposed to the underlying asset risk.

Quantamental Investing - A Century of Inventions

I am inspired by this list, especially if I imagine the investing world without this knowledge.

  1. DuPont Formula (Donaldson Brown, 1918)

  2. Value Investing (Benjamin Graham and David Dodd, 1928)*

  3. Dividend Discount Model (John Burr Williams, 1938)

What is better: Factor Zoo or Factor Museum?

Here are my 8-thoughts and 1 solution idea about Campbell Harvey and Yan Liu recently released paper on their influential concept of the factor zoo. To sum it up, it says that there are too many data-mined factors out there and that we should be using much higher t-statistics to accept factors.

What if Asset Managers Switched with Advisors?

One thing has not made sense to me.

Why does the first and likely the most important step of investing, which determines 95% of investment outcomes, is typically in the hands of Financial Advisors (including Wealth Managers and Consultants), while the second step, which barely moves the needle, belongs to Asset Managers?

Months Before AIG Went Bankrupt

A Story About Unexpected Risk.

It was at the beginning of 2008, at our downtown office on Pine Street in Manhattan. I was a young quant portfolio manager at AIG and I was standing in the office of one of my mentors, a talented senior portfolio manager who was looking nervously at his screen.

Value, Momentum and Basis in Commodity Futures: 1877-2017

Commodity Futures contracts were established in 1865, but commercially available data starts in 1959, leaving an 80+ year period of unstudied history. In our latest academic paper “Two Centuries of Commodity Futures Premia” Chris Geczy and I use hand-collected futures data to extend the well-known cross-sectional Value, Momentum and Basis factors in commodity futures back to 1877.