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Noël Amenc, Felix Goltz, Véronique Le Sourd, Ashish Lodh, Sivagaminathan Sivasubramanian:
EDHEC-Risk Institute conducted its 9th survey of European investment professionals about the usage and perceptions of ETFs at the end of 2015.
Over the last 15 years or so, the investment industry has experienced a series of profound structural changes, and an increasing number of serious new challenges are being faced by both institutional and individual investors as a result of these changes.
Juha Joenväärä, Bernd Scherer:
Using FoFs’ holdings data, we analyse the diversification choices of fund of hedge fund managers. Diversification is not a free lunch. It is not available for every fund of fund.
Adrian Fernandez-Perez, Bart Frijns, Ana-Maria Fuertes, Joëlle Miffre:
Investors are known to display a preference for equities with positive skews (or lottery-like payoffs) and an aversion to equities with negative skews (or those for which the probability of large losses is higher than that of similar large gains).
Noël Amenc, Sivagaminathan Sivasubramanian, Jakub Ulahel:
With recent developments in risk factor-based investing, many index providers, and more generally investment product providers, offer strategies that help investors gain exposure to various identified risk factors such as value, momentum and size, amongst others.
Hilary Till: This survey paper will discuss the (potential) structural sources of return for both CTAs and commodity indices based on a review of empirical research articles from both academics and practitioners.Download filesTYPE OF DOCUMENT : WORKING PAPER
Timotheos Angelidis, Athanasios Sakkas, Nikolaos Tessaromatis:
This study provides evidence using data from the G7 countries suggesting that return dispersion may serve as an economic state variable in that it reliably predicts time-variation in economic activity, market returns, the value and momentum premia and market volatility.
Lionel Martellini, Vincent Milhau: This paper examines the relative efficiency of standard forms of practical implementation of the factor investing paradigm based on commonly-used factors in the equity, fixed-income and commodity universes.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
Joëlle Miffre, Ana-Maria Fuertes, Adrian Fernandez-Perez:
This paper shows that backwardation versus contango factor-mimicking portfolios exhibit in-sample and out-of-sample predictive power for the first two moments of the distribution of long-run aggregate market returns and for the business cycle.
Noël Amenc, Saad Badaoui, Felix Goltz, Véronique Le Sourd, Ashish Lodh:
EDHEC-Risk carried out a survey among a representative sample of investment professionals to identify their views and uses of alternative equity beta.
Noël Amenc, Kumar Gautam, Felix Goltz, Nicolas Gonzalez, Jan-Philip Schade:
A standard practice in reporting geographic exposure of equity portfolios is to report breakdown of portfolio constituents by country or region, which are assigned to a stock based on its place of listing, incorporation or headquarters.
Noël Amenc, Felix Goltz, Véronique Le Sourd, Ashish Lodh, Eric Shirbini:
EDHEC Risk Institute conducted its 8th survey of European investment professionals about the usage and perceptions of ETFs at the end of 2014.
Adrian Buss, Raman Uppal, Grigory Vilkov:
Alternative assets, such as private equity, hedge funds, and real assets, are illiquid and opaque, and thus pose a challenge to traditional models of asset allocation.
Frédéric Blanc-Brude, Majid Hassan:
This paper, which is drawn from the Meridiam and Campbell Lutyens Research Chair at EDHEC on Infrastructure Equity Investment Management and Benchmarking, proposes a valuation framework for privately-held and very illiquid assets such as equity stakes in infrastructure projects.
Carlos Heitor Campani:
We provide a solution for evaluating non-conventional projects, firstly showing that the well-known modified internal rate of return does not correctly answer what investors want to measure.
This article is based on the author’s lecture, “Oil Futures Prices and OPEC’s Spare Capacity,” which was delivered at the University of Colorado-Denver Business School’s J.P. Morgan Center for Commodities on September 18, 2014 as part of the Center’s Encana Distinguished Lecture Series.
Frédéric Blanc-Brude, Majid Hasan, Omneia R.H. Ismail:
The purpose of the present publication, “Unlisted Infrastructure Debt Valuation & Performance Measurement”, which is drawn from the NATIXIS research chair at EDHEC-Risk Institute on the “Investment and Governance Characteristics of Infrastructure Debt Instruments”, is to design the first academically robust, yet operationally implementable valuation and risk measurement framework for investing in illiquid infrastructure debt.
Maxime Bonelli, Daniel Mantilla-Garcia:
We propose a variation of a predictive system that incorporates two (additional) economically motivated assumptions about the dynamics of expected returns, namely 1) their positivity, and 2) a time-varying volatility correlated with economic regimes.
Maxime Bonelli, Daniel Mantilla-Garcia:
Following recent evidence of out-of-sample stock market return predictability, the authors aim to evaluate whether the potential benefits suggested by asset allocation theory can actually
be captured in the real world using expected return estimates from a predictive system.
Frédéric Blanc-Brude, Frédéric Ducoulombier:
Latest research argues that the Australian superannuation industry could be further strengthened by the development of an industry-led reporting standard and certification scheme.
Noël Amenc, Romain Deguest, Felix Goltz, Ashish Lodh, Lionel Martellini, Eric Shirbini:
This publication argues that current smart beta investment approaches only provide a partial answer to the main shortcomings of capitalisation-weighted (cap-weighted) indices, and develops a new approach to equity investing referred to as smart factor investing.
This paper discusses the need and propose an approach to benchmark long-term investments in infrastructure, where long-term investment simply refers to any unlisted and illiquid asset.
This two-part series is excerpted from a presentation given by the author on February 10th, 2014 at a joint meeting in Chicago of the following two professional organizations: the Professional Risk Managers’ International Association (PRMIA) and the Chartered Alternative Investment Analyst (CAIA) Association.
Lionel Martellini, Vincent Milhau, Andrea Tarelli:
The present publication was produced as part of the “Asset Allocation Solutions” research chair at EDHEC-Risk Institute, in partnership with Lyxor Asset Management.
Serge Darolles, Mathieu Vaissié:
We use the regime switching approach introduced in Pelletier (2006), and adapted by Giamouridis and Vrontos (2007) to the context of hedge fund portfolios, to design a new tactical style allocation factor.
Adrian Fernadez-Perez, Ana-Maria Fuertes, Joëlle Miffre:
This paper proposes a commodity-based specification of the Intertemporal CAPM (ICAPM) that uses state variables grounded on the theories of storage and hedging pressure.
Concerns about systemic credit risk in the financial system due to the OTC derivatives market has encouraged the use of counterparty credit risk mitigation techniques, including the use of compression.
Frédéric Ducoulombier, Felix Goltz, Véronique Le Sourd, Ashish Lodh:
The latest edition of the European ETF Survey has been conducted as part of the Amundi ETF "Core-Satellite and ETF Investment" research chair at EDHEC-Risk
Frank J. Fabozzi, Mike E. Nawas, Dennis Vink:
In much of the current research on market practices with respect to the use of credit ratings, the rating shopping hypothesis and the information production hypothesis feature prominently.
Saad Badaoui, Romain Deguest, Lionel Martellini, Vincent Milhau:
In the present publication, which was produced as part of the BNP Paribas Investment Partners research chair at EDHEC-Risk Institute on “ALM and Institutional Investment Management,” led by Professor Lionel Martellini, we have attempted to assess the views of pension funds and sponsor companies as they relate to their reactions to dynamic liability-driven investing (LDI) strategies and their desire to integrate this approach into their processes.
Tiffanie Carli, Romain Deguest, Lionel Martellini:
The present publication, “Improved Risk Reporting with Factor-Based Diversification Measures,” is drawn from the CACEIS research chair on “New Frontiers in Risk Assessment and Performance Reporting” at EDHEC-Risk Institute.
Attilio Meucci, David Ardia, Marcello Colosante:
The Entropy Pooling approach is a versatile theoretical framework to process market views and generalised stress-tests into an optimal “posterior” market distribution, which is then used for risk management and portfolio management.
Lionel Martellini, Vincent Milhau:
This paper proposes an empirical analysis of the opportunity gains (costs) involved in introducing (removing) various assets with attractive inflation-hedging properties for long-term investors
facing inflation-linked liabilities.
Liliana Arias, Mohamed El Hedi Arouri, Philippe Foulquier:
This study shows that LTGA calibration continues to favour short-duration bonds and could undermine the financial stability and financing of both sovereigns and corporates.
Frédéric Blanc-Brude, Omneia R.H. Ismail:
This paper develops a framework to measure the credit risk of unlisted infrastructure debt, including
the first formulation of "distance to default" in infrastructure project finance.
Lionel Martellini, Vincent Milhau:
The present publication is drawn from the Rothschild & Cie research chair on “The Case for Inflation-Linked Corporate Bonds: Issuers’ and Investors’ Perspectives” at EDHEC-Risk Institute.
Lixia Loh, Lionel Martellini, Stoyan Stoyanov:
This study from EDHEC-Risk Institute, entitled “The Local Volatility Factor for Asian Stock Markets,” has shown that using US VIX to hedge the volatility risk of Asian portfolios is not particularly effective.
Frédéric Blanc-Brude, Omneia R.H. Ismail:
In this paper, the authors develop a framework to measure the credit risk of unlisted infrastructure debt, including the first formulation of "distance to default" in infrastructure project finance.
Noël Amenc, Felix Goltz, Lionel Martellini:
Recent years have seen increasing interest in new forms of indexation, referred to as Smart Beta strategies. Investors are attracted by the performance of these indices compared to traditional capweighted indices.
Frédéric Blanc-Brude, François Cocquemas, Albena Georgieva:
The purpose of this publication, which is drawn from the AXA Investment Managers research chair at EDHEC-Risk Institute on “Regulation and Institutional Investment”, is to examine the role of pension systems in the dinancing of current and future standards of living in Asia’s ageing nations and to study the potential contribution of scientific asset management to the challenges faced by the region’s pension reserve funds and funded pension schemes.
Romain Deguest, Lionel Martellini, Vincent Milhau:
This paper argues that inflation-linked bonds, in addition to being attractive for issuing corporations, are also attractive for investors such as pension funds facing long-term inflation-linked liabilities.
Romain Deguest, Lionel Martellini, Vincent Milhau:
The present publication, “Hedging versus Insurance: Long-Horizon Investing with Short-Term Constraints,” was produced as part of the BNP Paribas Investment Partners research chair at EDHEC-Risk Institute on “ALM and Institutional Investment Management”.
Frédéric Blanc-Brude, Omneia R. H. Ismail:
This paper is the first one of a series examining the opportunity for institutional investors to become involved in infrastructure debt, as part of the NATIXIS Research Chair on infrastructure debt instruments and governance.
Juha Joenväärä, Robert Kosowski:
The present document, which represents the latest publication from the “Advanced Modelling for Alternative Investments” research chair at EDHEC Risk Institute, supported by the Prime Brokerage Group at Newedge, is part of the chair research on “Analysing the Convergence between Mainstream and Alternative Money Management.”
Narasimhan Padmanaban, Masayoshi Mukai, Lin Tang, Véronique Le Sourd:
In a study entitled “Assessing the Quality of Asian Stock Market Indices,” researchers at EDHEC-Risk Institute have reported results for 10 major Asian stock market indices over the past decade.
Felix Goltz, Véronique Le Sourd, Masayoshi Mukai , Fahd Rachidy:
In this survey, researchers at EDHEC-Risk Institute have analysed industry reactions to a previous EDHEC-Risk study on corporate bond indices and confirmed that investors are dissatisfied with the indices currently on offer.
Ana-Maria Fuertes, Joëlle Miffre, Adrian Fernandez-Perez:
This article demonstrates that momentum, term structure and idiosyncratic volatility signals in commodity futures markets are not overlapping, which motivates the design of a new triplescreen strategy.
Ferhat Akbas, Ekkehart Boehmer, Bilal Erturk, Sorin Sorescu:
This study show that short interest predicts stock returns because short sellers are able to anticipate bad news, negative earnings surprises, and downward revisions in analyst earnings forecasts.
While public and private pension systems in the EU are under tremendous pressure, a new study by EDHEC-Risk Institute analyses the explicit and implicit pension liabilities that are weighing on the public finances, and the principal related risks.
Akindynos-Nikolaos Balta, Robert Kosowski:
In this paper, we rigorously establish a relationship between time-series momentum strategies in futures markets and commodity trading advisors (CTAs) and examine the question of capacity constraints in trend-following investing.
Noël Amenc, Frédéric Ducoulombier:
Within the framework of research on the topic of a better grasp of non-financial risks, which has been conducted over the last three years thanks to sponsorship from CACEIS, EDHEC-Risk Institute would like to summarise its findings and conclusions in a series of proposals targeting not only European regulators, but also fund management professionals and investors.
The rising interest of institutional investors for commodities since the early 2000s prompted remarkable financial engineering in the commodity index space which is now in its third generation.
Noël Amenc, Philippe Malaise, Lionel Martellini:
Tracking error is not necessarily bad. Just like with good and bad cholesterol, there is “good” tracking error, which refers to outperformance of a portfolio with respect to the benchmark, and “bad” tracking error, which refers to underperformance with respect to the benchmark.
Noël Amenc, François Cocquemas, Lionel Martellini, Samuel Sender:
After a short summary of some of the main challenges facing European pension systems, this paper discusses the Commission’s proposals point by point.
Akindynos-Nikolaos Balta, Robert Kosowski:
Constructing a time-series momentum strategy involves the volatility-adjusted aggregation of univariate strategies and therefore relies heavily on the efficiency of the volatility estimator and on the quality of the momentum trading signal.
Caio Almeida, René Garcia:
This study, produced as part of the Newedge research chair on “Advanced Modelling for Alternative Investments,” Proposes a Robust New Method for Assessing Hedge Fund Performance.
In the world of institutional investment, the performance of the office property sector has traditionally been valued using indices constructed from appraisal values, rather than values derived from transactions.
The purpose of the present publication, “Shifting Towards Hybrid Pension Systems: A European Perspective”, which is drawn from the AXA Investment Managers research chair at EDHEC-Risk Institute on “Regulation and Institutional Investment”, is to examine recent developments and the major risks of retirement systems, from both the sponsor and pension risk perspective, while focusing on European pension schemes.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
That study put forward a model to optimise the investment and risk management practices of sovereign wealth funds, which can be regarded as the extension to sovereign wealth funds of the liabilitydriven investing paradigm recently developed in the pension fund industry.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
Georgios Angelopoulos, Daniel Giamouridis, Georgios Nikolakakis:
Cross-market deviations in (deep out-of-the-money) equity put option prices and credit defaultswap spreads of the same firm are temporary and predict future movements in the put options and credit default swaps (Carr and Wu, 2011).
Timotheos Angelidis, Daniel Giamouridis, Nikolaos Tessaromatis:
Mutual fund manager excess performance should be measured relative to their self-reported benchmark rather than the return of a passive portfolio with the same risk characteristics.
Exchange-traded funds have traditionally been perceived as vehicles combining the diversified exposure of mutual funds with the low-cost, flexibility, ease and liquidity of trading enjoyed by publicly listed stocks, while also offering lower-expense ratios and better tax-efficiency relative to mutual funds.Download filesTYPE OF DOCUMENT : POSITION PAPER
This study performs a theoretical and empirical analysis of the relationship between the price of Eurozone sovereign-linked credit default swaps (CDS) and the same sovereign bond markets during the Eurozone debt crisis of 2009-2011.Download filesTYPE OF DOCUMENT : WORKING PAPER
Agostino Capponi, Jakša Cvitanic, Türkay Yolcu:
We consider a continuous time model of the project value process that can only be observed with noise, and we allow for the possibility that the manager in charge of the project can misrepresent the observed value.
Agostino Capponi, Jakša Cvitanic, Türkay Yolcu:
We propose a new continuous time contracting model, where the project value process can only be observed with noise, and there are two sources of moral hazard: effort and misreporting.
As the choice of an index is a crucial step in both asset allocation and performance measurements, it is useful to investigate index use and perceptions about indices. The EDHEC-Risk European Index Survey 2011 analyses the current uses of and opinions on stock, bond and equity volatility indices with the aim of providing unique insight into the users’ perspective in the index industry. Opinions from 104 institutional investment managers were gathered, representing approximately seven trillion euros of assets under management.Download filesTYPE OF DOCUMENT : ETUDE/RAPPORT
Performance measurement of socially responsible investment (SRI) has been the subject of numerous studies in various countries. However, the conclusions of performance assessments always depend on the choice of the reference index one uses.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
Jakša Cvitanic, Andrei Kirilenko:
Do high frequency traders affect transaction prices? In this paper we derive the distribution of transaction prices in limit order markets populated by low frequency traders before and after the entrance of a high frequency trader (HFT).
This publication presents the results of the latest research on structured forms of investment strategies done at EDHEC-Risk Institute with the support of Societe Generale Corporate & Investment Banking and under the leadership of Stoyan Stoyanov, Head of Research at EDHEC Risk Institute–Asia and Professor of Finance at EDHEC Business School.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
Food price volatility has spiked to levels last seen in the 1970s. For low-income countries, food price hikes, such as have occurred recently, tend to significantly increase the incidence of intra-state conflicts, according to IMF research.Download filesTYPE OF DOCUMENT : POSITION PAPER
This publication contains the results of the second year of research done at EDHEC-Risk Institute as part of the EDHEC-Deutsche Bank research chair on asset-liability management (ALM) techniques for sovereign wealth fund management.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
As part of the AXA research chair on regulation and institutional investment, EDHEC surveyed corporate pension funds, their sponsors, and advisers to assess how sponsors manage pension risk and how pension funds manage sponsor risk.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
Jean-Marie Dufour, René Garcia, Abderrahim Taamouti:
We provide evidence on two alternative mechanisms of interaction between returns and volatilities: the leverage effect and the volatility feedback effect.
Whether average idiosyncratic volatility has recently risen, whether it is a good predictor for aggregate market returns and whether it has a positive relationship with expected returns in the cross-section are still matters of active debate.Download filesTYPE OF DOCUMENT : WORKING PAPER
On October 16th, 2010, the front page of the Wall Street Journal (WSJ) carried a story entitled, “Flashback to 1870 as Cotton Hits Peak” (Cancryn and Cui, 2010). The newspaper included a graphic of the iconic Edgar Degas’ 1873 painting, “The Cotton Exchange at New Orleans” (See Exhibit 1). The article noted that cotton prices had not been this high since at least 1870.Download filesTYPE OF DOCUMENT : WORKING PAPER
This paper addresses the problem of option hedging and pricing when a futures contract, written either on the underlying asset or on some imperfectly correlated substitute for the underlying asset, is used in the dynamic replication of the option payoff.Download filesTYPE OF DOCUMENT : WORKING PAPER
UCITS, the European retail regulated investment funds, were created shortly after the 1985 passage of the first UCITS directive. Since then, non-financial risks have increased, but European authorities and investment professionals failed to study the impact of these risks when they allowed UCITS funds to evolve.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
In this paper, we study asset prices in a dynamic, continuous-time, general- quilibrium endowment economy where agents have power utility and differ with respect to both beliefs and their preference parameters for time discount and risk aversion.Download filesTYPE OF DOCUMENT : WORKING PAPER
Our objective in this paper is to examine whether one can use option-implied information to improve the selection of portfolios with a large number of stocks, and to document which aspects of option-implied information are most useful for improving their out-of-sample performance.Download files
New EDHEC-Risk Institute Research Questions Current Corporate Pension Fund ALM Practices and Proposes a New Integrated Model for Analysing the Capital Structure of Corporate Sponsors and Pension Fund Allocation Decisions.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
A decomposition of a sub-class of spectral risk measures is introduced in terms of L-moments accounting for geometric characteristics of the return distribution similar to the ones described by the ordinary moments.Download filesTYPE OF DOCUMENT : WORKING PAPER
This publication contains the results of the first-year research work conducted at EDHEC-Risk Institute within the EDHECDeutsche Bank research chair on assetliability management (ALM) techniques for sovereign wealth fund management.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
We examine how the existence of individual equity options, publicly traded corporate bonds and credit default swap (CDS) contracts affects equity market quality for a panel of NYSE-listed firms during 2003-2007.Download filesTYPE OF DOCUMENT : WORKING PAPER
Jakša Cvitanic, Semyon Malamud:
We provide a representation for the nonmyopic optimal portfolio of an agent consuming only at the terminal horizon when the single state variable follows a general diffusion process and the market consists of one risky asset and a risk-free asset.
In an attempt to address the concern over financially illiterate individuals being increasingly responsible for investment decisions related to retirement risk, the financial industry has started to design dedicated mutual fund products known as target date funds.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
Meeting the challenges of modern investment practice involves the design of novel forms of investment solutions, as opposed to investment products, customised to meet investors' long-term objectives while respecting the short-term (regulatory or otherwise) constraints they have to face.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
Since hedge fund returns are not normally distributed, mean-variance optimisation techniques, which would lead to substantial welfare losses from the investor’s perspective, need to be replaced by optimisation procedures incorporating higher-order moments and comoments.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
This article compares the risk and performance of two traditional commodity indices with enhanced long-only versions that exploit signals based on momentum, term structure and the time-to-maturity of the contracts.Download filesTYPE OF DOCUMENT : WORKING PAPER
EDHEC-Risk Institute has announced the results of the EDHEC European ETF Survey 2010, which presents the results of a comprehensive survey of 192 institutional investors, asset managers and private wealth managers conducted between January and March 2010.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
As part of the CACEIS research chair on non-financial risks in investment funds, EDHEC surveyed UCITS and alternative asset managers, their service providers, external observers, and investors for their views of structuring hedge fund strategies as UCITS.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
In the presence of non-normally distributed asset returns, optimal portfolio selection techniques require estimates for variance-covariance parameters, along with estimates for higher-order moments and comoments of the return distribution.Download filesTYPE OF DOCUMENT : WORKING PAPER
Following the 2008 financial crisis, private financial institutions such as hedge funds and private equity funds have been faced with multiple calls for their regulation, both for consumer protection and systemic reasons.Download filesTYPE OF DOCUMENT : WORKING PAPER
EDHEC has surveyed pension funds, their advisers, their regulators, their fiduciary managers, and their asset managers for their reactions to an EDHEC study entitled “Impact of Regulations on the ALM of European Pension Funds.”Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
The objective of this paper is to shed light on the ways new forms of welfare- improving financial innovation inspired by the use of asset-liability management techniques, originally developed for institutional money management, can be used in private wealth management.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
In September 2008, the U.S. Securities and Exchange Commission (SEC) surprised the investment community by adopting an emergency order that temporarily banned most short sales in nearly 1,000 financial stocks.Download filesTYPE OF DOCUMENT : WORKING PAPER
Du point de vue de la régulation de la gestion d’actifs, l’analyse des dirigeants européens, notamment français et allemands, dans l’été 2007 n’a pas été à la hauteur des enjeux de la crise financière que nous connaissons depuis deux ans. En désignant les hedge funds, puis les ventes à découvert comme responsables de la déstabilisation des marchés, les dirigeants politiques et les régulateurs de marchés ont retardé la prise de conscience quant à la gravité de la crise et la faillite du système de régulation.Download filesTYPE OF DOCUMENT : POSITION PAPER
The recent pension crisis has triggered a fierce debate in most developed countries between advocates of a tighter regulation designed to provide explicit incentives for pension funds to increase their focus on risk management, and those arguing that imposing short-term funding constraints and solvency requirements on such long-term investors would only increase the cost of pension financing.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
The development of alternative investment has not yet been accompanied by a genuine consideration of the specific characteristics of the risks and returns of hedge funds with regard to the provision of information to investors.Download filesTYPE OF DOCUMENT : WORKING PAPER
This paper attemps to determine what fraction a static investor should optimally allocate to investment strategies with convex exposure to stock market returns in a general economy with stochastically time-varying interest rates and stock market excess returns.Download filesTYPE OF DOCUMENT : WORKING PAPER
This paper attempts to determine whether exchange-listed hedge funds experience longer lifetimes than non-listed funds, even after factors known to affect survival, such as size and performance, are considered.Download filesTYPE OF DOCUMENT : WORKING PAPER
A vast literature has documented the value premium and the small firm effect as pervasive stylized facts in empirical asset pricing and yet research has been largely unable to provide entirely convincing explanations of why these phenomena exist.Download filesTYPE OF DOCUMENT : WORKING PAPER
The EDHEC European Investment Practices Survey 2008 (EDHEC 2008) sheds light on current practices in the industry and compares these practices with the recent state of the art as described in the investment literature.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
The present publication is the first to be drawn from the EDHEC/Morgan Stanley Investment Management research chair on Financial Engineering and Global Alternative Portfolios for Institutional Investors.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
The financial crisis has put great pressure on banks and led to a number of emergency measures intended to restore confidence in the banking system: tentative changes to accounting standards, recapitalisation of the banking industry, and higher capital requirements.Download filesTYPE OF DOCUMENT : POSITION PAPER
A “call for reaction” was sent by EDHEC to international institutional investors and asset managers to compare investor views of amendments to the IAS39 and IFRS 7 standards not just with the conclusions of an initial EDHEC study, but also with the ambitions of these reforms prepared and adopted in great haste.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
In 2008, the EDHEC Risk and Asset Management Research Centre studied the performance of socially responsible investment (SRI) funds distributed in France. This study covered a six-year period (2002-2007) and focused more specifically on funds invested in assets from France, the Euro zone, and Europe.Download filesTYPE OF DOCUMENT : POSITION PAPER
The position this paper takes is that if all institutional investors are bound by regulations that force them to sell risky assets during downturns, these assets will ultimately be absorbed by unregulated long-term investors.Download filesTYPE OF DOCUMENT : POSITION PAPER
In US dollar terms, the price of oil rose 525% from the end of 2001 to July 31, 2008. This position paper argues that, despite the appeal of blaming speculators, supply-and-demand imbalances, the fall in the dollar and low spare capacity in the oil-producing countries are the major causes of this sharp rise.Download filesTYPE OF DOCUMENT : POSITION PAPER
Following recent research on the relevance of idiosyncratic risk in asset pricing models, Lionel Martellini proposes to use total volatility as a model-free estimate of a stock's excess expected return, and analyze the implications in terms of the design of improved equity benchmarks.Download filesTYPE OF DOCUMENT : WORKING PAPER
The recent pension crisis has triggered a fierce debate in most developed countries between advocates of tighter regulation designed to provide explicit incentives for pension funds to increase their focus on risk management and those arguing that imposing short-term funding constraints and solvency requirements on such long-term investors would only increase the cost of pension financing.Download filesTYPE OF DOCUMENT : POSITION PAPER
In summary, our position paper argues that with the fundamental supply-and-demand balance so tight and that with effective OPEC spare capacity so low it is logical to see very high prices to ration demand and/or encourage additional supply. That is the job and message of price, even if the message is unpopular.Download filesTYPE OF DOCUMENT : POSITION PAPER
A number of major investment banks and asset management consultants have recently launched investment products that promise to replicate hedge fund returns by following rule-based strategies that invest in liquid financial products.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
The publication that we are pleased to present here covers the industry reactions to an EDHEC study entitled “Asset-Liability Management Decisions in Private Banking,” which was drawn from EDHEC’s ALM and Asset Management research programme.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
Instead of assuming the distribution of return series, Engle and Manganelli (2004) propose a new Value-at-Risk (VaR) modeling approach, Conditional Autoregressive Value-at-Risk (CAViaR), to directly compute the quantile of an individual asset’s returns which performs better in many cases than those that invert a return distribution.Download filesTYPE OF DOCUMENT : WORKING PAPER
In September 2006, Amaranth Advisors, LLC collapsed under the weight of losses, which were reported as $6.6-billion. Unfortunately, this meant that the fund had become responsible for the largest hedge-fund debacle to have thus far occurred.
While an ever increasing share of equity assets is invested in indexing strategies, the standard practice of using capitalisation weighting to construct stock market indices has been the object of much criticism.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
This paper analyses a set of characteristics-based indices that have recently been launched on the US market and have been said to outperform standard market cap-weighted indices
over particular backtest samples.
In a context of moderate performance in the stock and bond markets in 2007, Funds of Hedge Funds, which are often taken to give an aggregate view of the industry's performance, returned 10.07% on average for the year, compared to 3.53% for the S&P 500 and 4.14% for the Lehman Global US Treasury Bond index.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
In its response to the CEIOPS consultation on the preliminary technical specifications for the fourth quantitative impact survey (QIS4), EDHEC argues that the main risk faced by life insurance companies is not taken into account in the standard formula.Download filesTYPE OF DOCUMENT : POSITION PAPER
Djankov et al. (2003a) propose and measure for 109 countries in the year 2000 an index of formalism of legal procedure for two simple disputes: eviction of a non-paying tenant and collection of a bounced check. For a sub-sample of 40 countries, we compute this index every year starting in 1950, which allows us to study the evolution of legal rules.Download filesTYPE OF DOCUMENT : WORKING PAPER
Hedge fund indices have been criticised for a lack of representativity and for their biases, to the point that serious doubts about the usefulness of hedge fund indices have been raised by investors and regulators.Download filesTYPE OF DOCUMENT : WORKING PAPER
In the presence of non-normally distributed asset returns, optimal portfolio selection techniques require not only estimates of variance-covariance parameters, but also estimates of higher-order moments and comoments of the return distribution.Download filesTYPE OF DOCUMENT : WORKING PAPER
Several studies have put forward that hedge fund returns exhibit a non-linear relationship with equity market returns, captured either through constructed portfolios of traded options or piece-wise linear regressions.Download filesTYPE OF DOCUMENT : WORKING PAPER
In the last decade, economists have produced a considerable body of research suggesting that the historical origin of a country's laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes.Download filesTYPE OF DOCUMENT : WORKING PAPER
In this paper, we introduce a suitable extension of the Black-Litterman Bayesian approach to portfolio construction in the presence of non-trivial preferences about higher moments of asset return distributions.Download filesTYPE OF DOCUMENT : WORKING PAPER
Soucieux de trouver rapidement une explication évitant de les remettre en cause, les dirigeants de certains pays européens ont mis en exergue le rôle une fois de plus néfaste qu'auraient joué les hedge funds dans la crise de cet été. Cette crise est le résultat d'un ajustement brutal du prix des actifs lié à une augmentation de l'aversion pour le risque de l'ensemble des investisseurs.Download filesTYPE OF DOCUMENT : POSITION PAPER
A recent publication1 by the EDHEC Risk and Asset Management Research Centre has drawn conclusions that highlight the shortcomings of well known capitalisation- or price-weighted stock market indices and argues that the choice of benchmark for asset allocation or performance measurement is a task requiring particular care.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
In this paper, we examine how standard exchange-traded fixed-income derivatives (futures and options on futures contracts) can be included in a sound risk and asset management process so as to improve risk and return performance characteristics of managed portfolios.Download filesTYPE OF DOCUMENT : WORKING PAPER
This paper presents evidence of predictability in the time-varying shape of the U.S. term structure of interest rates using a robust recursive modelling approach based on a Bayesian mixture of multi-factor models.Download filesTYPE OF DOCUMENT : WORKING PAPER
This paper focuses on the use of market variables that exploit the linkages between spot, futures and derivatives markets, as opposed to the business cycle indicators employed in most of the earlier studies.Download filesTYPE OF DOCUMENT : WORKING PAPER
In this paper we provide a detailed critical analysis of various methodologies involved in the so-called passive replication of hedge fund returns, a subject that has sparked renewed interest following recent initiatives by major investment banks such as Merrill Lynch and Goldman Sachs.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
This article will argue that one can indeed intelligently invest in the commodity markets and will briefly touch on three approaches, which in turn are drawn from the Intelligent Commodity Investing book.Download filesTYPE OF DOCUMENT : WORKING PAPER
As part of a newly created research programme focusing on Best Execution and Operations Performance', EDHEC's research team has actively contributed to the review of existing approaches to measuring execution quality and recently introduced an innovative framework for analyzing transaction costs and measuring execution performance: EBEX.Download filesTYPE OF DOCUMENT : WORKING PAPER
Volatility is an alternative betaa risk premium captured by hedge fund managers and investment bank proprietary tradersthat is today moving closer to the mainstream and should be thought of as a veritable asset class.Download filesTYPE OF DOCUMENT : WORKING PAPER
In this paper, we examine how standard exchange-traded fixed-income derivatives (futures and options on futures contracts) can be made part of sound risk and asset management in such a way as to improve the risk and return performance characteristics of managed portfolios.Download filesTYPE OF DOCUMENT : WORKING PAPER
Dans un rapport intitulé : " Hedge Fund Performance: A Vintage Year for Hedge Funds? ", Véronique Le Sourd, Ingénieur de Recherche Senior à l'EDHEC Risk and Asset Management Research Centre, fournit un exposé détaillé de la performance de chacune des stratégies de hedge fund qui constituent les indices alternatifs EDHEC.Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
This document contains our answer to CP20, a consultation process initiated by CEIOPS (Committee of European Insurance and Occupational Pensions Supervisors) on the "Advice to the European Commission in the Framework of the Solvency II Project on Pillar I Issues".Download filesTYPE OF DOCUMENT : POSITION PAPER
This paper, which is being written to provide an overview of the multitude of publications we have seen on hedge fund performance, is the result of a reading and analysis of about 200 studies on this subject.Download filesTYPE OF DOCUMENT : POSITION PAPER
The Amaranth case is surprising in many ways. It is definitely a surprise that a well-respected multi-strategy hedge fund could lose about $6-billion in little over a week. It is perhaps an even greater surprise that such a loss would have little knock-on effects on the hedge fund industry and the wider capital markets.Download filesTYPE OF DOCUMENT : WORKING PAPER
The profound changes in the risk management of insurance companies, brought about by the increasing complexity and variety of risks over the last two decades, have made it necessary to revise prudential regulations (Solvency II) and to adapt the international accounting standards (IFRS)Download filesTYPE OF DOCUMENT : EDHEC PUBLICATION
Most previous tests of hedge fund performance have failed to model the exposure of hedge fund returns to systematic non-normality risks, nor have they taken the tactical asset allocation decisions of hedge funds managers into account.Download filesTYPE OF DOCUMENT : WORKING PAPER
Enterré au terme d'un long débat parlementaire au printemps 2003 par monsieur Jean-Pierre Raffarin, le dossier des privatisations des sociétés concessionnaires d'autoroutes (cession de 50,4% d'ASF, 75,7% de SANEF et 70,2% d'APRR) a finalement refait surface le 8 juin 2005 lors d'un discours de monsieur Dominique de Villepin.Download filesTYPE OF DOCUMENT : POSITION PAPER
When an investor elects to invest in a commodity index product, that investor realizes that he or she will earn the inherent return of the asset class and will be able to do so cheaply, but will not be provided with any downside risk protection.Download filesTYPE OF DOCUMENT : WORKING PAPER
Using an original database of 634 market neutral hedge funds, this study formally analyses the market neutrality of market neutral funds which are particular in the hedge fund universe since the only objective of these funds is to provide positive returns completely independent of the market conditions.Download filesTYPE OF DOCUMENT : WORKING PAPER
In this paper, we emphasize the need for the hedge fund industry to adopt a consumer (investor)-driven approach, as opposed to the current producer (manager) perspective, and we call for the emergence of new types of offerings with characteristics better suited to the needs of institutional investors.Download filesTYPE OF DOCUMENT : WORKING PAPER
As a consequence of its greater maturity, the hedge fund industry has extended its investor base to
institutional investors, who are now faced with a large number of product offerings including not only single hedge funds, but also funds of funds and, more recently, investible indexes.
Noël Amenc, Philippe Malaise, Lionel Martellini, Daphné Sfeir:
It has been long argued that equity managers can use derivatives markets to help implement a systematic risk management process designed to enhance the performance of their portfolio (see for example Ineichen (2002) for a recent reference).
Noël Amenc, Jean-René Giraud, Philippe Malaise, Lionel Martellini:
Newly launched fixed-income Exchange-Traded Funds (ETFs) have specifically been designed to track bond market indices, and share many of the same benefits of equity ETFs, including in particular lower costs, transparency, buying and selling flexibility, all day tracking and trading.
Walter Géhin, Mathieu Vaissié:
This study proposes an overview of hedge fund strategy benchmarks, on the basis of academic studies, the points of view of practitioners and documentation from index providers.
Following a growing concern among investors about the quality of hedge fund index return data, and given the lack of capacity and transparency specific to that industry, this paper questions from an academic perspective whether it is feasible or not to design hedge fund benchmarks satisfying all defining properties for a good index.Download filesTYPE OF DOCUMENT : WORKING PAPER
Christophette Blanchet-Scalliet, Nicole El Karoui, Lionel Martellini:
This paper addresses the problem of pricing and hedging a random cash-flow received at a random date in a general stochastic environment.
Over the last few years, alternative investment strategies have dramatically gained in popularity. Initially reserved for High Net Worth Individuals (HNWI), they progressively drew the attention of individual and institutional investors, to reach approximately 1 trillion dollars in assets under management today.Download filesTYPE OF DOCUMENT : WORKING PAPER
There is an increasing amount of evidence that shows the benefits of considering hedge funds as an asset class at the strategic asset allocation level. The investors’ greatest challenge remains the identification of desirable investment vehicles, since very little formal quantitative analysis of hedge funds has been done in the past.Download filesTYPE OF DOCUMENT : WORKING PAPER
Over the past decade, the hedge fund industry has grown immensely. According to estimates, the number of hedge funds increased from 2,000 to 8,000, assets under management went from US $67 billion to US $800 billion, and inflows of money to hedge funds have never been greater.Download filesTYPE OF DOCUMENT : WORKING PAPER
Noël Amenc, Philippe Malaise, Lionel Martellini, Daphné Sfeir:
This paper presents strong evidence of predictability in various fixed-income style portfolio returns using a robust recursive modelling approach based on multi-factor models for the return on bond indices.
Lionel Martellini, Branko Urosevic:
Executive compensation packages are often valued in an inconsistent manner: while employee stock options (ESOs) are typically valued ex-ante, i.e. before uncertainties are resolved, cash bonuses are valued ex-post, i.e. by discounting the realised cash grants.
Lionel Martellini, Daphné Sfeir:
Tactical Asset Allocation (TAA) broadly refers to active strategies that seek to enhance portfolio performance by opportunistically shifting the asset mix in a portfolio in response to the changing patterns of return and risk.
Noël Amenc, Lionel Martellini:
The fact that hedge funds are starting to gain wide acceptance while they still remain a somewhat mysterious asset class enhances the need for a better measurement of their performance.
M. Schyns, Y. Crama, G. Hübner:
the objective of this paper is to propose a coherent methodology which allows for the avoidance some of the pitfalls that are encountered when developing financial models.
Noël Amenc, Lionel Martellini:
This paper attempts to evaluate the out-of-sample performance of an improved estimator of the covariance structure of hedge fund index returns, focusing on its use for optimal portfolio selection.
Noël Amenc, Philippe Malaise, Lionel Martellini, Daphné Sfeir:
Even though there is little evidence of predictability in stock specific risk, most equity market neutral managers still rely on stock picking as the preferred way to generate abnormal returns.
Octave Jokung, Jean-Christophe Meyfredi:
The present paper conducts an empirical study by examining the Market Model and the three versions of the 4-State Model (translated, rotated and un-rotated) in a mean-beta framework.