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EDHEC-Risk Efficient Equity Indices
FTSE EDHEC-Risk ERAFP SRI Index
Equity Index Research
EDHEC-Risk Alternative Indexes
Hedge Fund Index Research
EDHEC-Risk IEIF Commercial Property Indices
Amundi ETF "Core-Satellite and ETF Investment" Research Chair
Solvency II Benchmarks
Style and Performance Analysis
Hedge Fund Performance
EuroPerformance/EDHEC-Risk Institute Style Ratings
Performance Measurement for Traditional Investment
Asset Allocation and Alternative Diversification
Real Assets
Newedge "Advanced Modelling for Alternative Investments" Research Chair
CME Group "Exploring the Commodity Futures Risk Premium: Implications for Asset Allocation and Regulation" Strategic Research Project
SGCIB "Structured Equity Investment Strategies for Long-Term Asian Investors" Strategic Research Project
Asset Allocation and Derivative Instruments
Structured Forms of Investment Strategies
FBF "Structured Products and Derivatives" Research Chair
Eurex "The Benefits of Volatility Derivatives in Equity Portfolio Management" Strategic Research Project
ALM and Asset Management
AXA Investment Managers "Regulation and Institutional Investment" Research Chair
BNP Paribas Investment Partners "ALM and Institutional Investment Management" Research Chair
Deutsche Bank "Asset-Liability Management Techniques for Sovereign Wealth Fund Management" Research Chair
Ontario Teachers' Pension Plan "Advanced Investment Solutions for Liability Hedging for Inflation Risk" Research Chair
Rothschild & Cie "The Case for Inflation-Linked Corporate Bonds: Issuers' and Investors' Perspectives" Research Chair
Russell Investments "Solvency II Benchmarks" Research Chair
Operational Risks and Performance
Best Execution: MiFID and TCA
Mitigating Hedge Funds Operational Risks
CACEIS "Risk and Regulation in the European Fund Management Industry" Research Chair
EDHEC-Risk Publications
Reports, Studies, Surveys and Position Papers
Academic Publications
All EDHEC-Risk Publications
Events
Events organised by EDHEC-Risk Institute
Analysing Sovereign Risk for Portfolio Management Decisions Seminar, London, 12-13 June, 2012
CFA Institute/EDHEC-Risk Institute Advances in Asset Allocation Seminar, New York, 12-14 June, 2012
Advanced Commodity Investment Seminar, London, 19-20 June, 2012, New York, 16-17 July, 2012
New Frontiers in Equity Investing Seminar, Boston, 26-27 June, 2012
Events involving EDHEC-Risk Institute's participation
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Research Chairs and Strategic Research Projects
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IPE EDHEC-Risk Institute Research Insights
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EDHEC-Risk in the Press
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EDHEC Business School
EDHEC-Risk Executive Education
EDHEC-Risk Institute PhD in Finance
EDHEC-Risk Institute Executive MSc in Risk and Investment Management
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| Performance |
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Optimal market estimates of French office property performance |
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| 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. This is a direct result of the following: (i) low transaction volume of office properties compared to the value of the stock (typically 3-5% on an annual basis); (ii) the OTC organisation of the market, which limits any centralisation of data; and (iii) the heterogeneity of traded goods.
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| Indices and Benchmarking |
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Russell Stability Indexes – Real-World Results |
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| A year ago Russell launched its defensive and dynamic indexes - together known as the Russell Stability Index Series - initially for the US market but now extended to include both Global and European versions. These are based on the work of Russell U.S. manager research analysts who recognised that some managers’ returns within each of the broad value and growth styles were less correlated with the cyclical sectors of the market than other managers’ returns. More... |
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| Performance |
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| A Statistical Analysis of Mutual Fund Performance Measures: The Relevance of IRs, Betas, and Sharpe Ratios |
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| Hery Razafitombo. Performance measurement plays an essential role for investors when choosing to invest in mutual funds. Since Markowitz (1952), numerous indicators have been developed to evaluate fund performance. Traditional indicators are also complemented with measures that evaluate criteria such as asset allocation and performance persistence. The growing number of indicators can render performance evaluation more confused as the use of the various indicators can lead to varying results and varying fund rankings. More... |
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| Risk Management |
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| Case Studies and Risk Management in Commodity Derivatives Trading |
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| Hilary Till Until recently, one could only gain expertise in commodity-derivatives relationships if one had worked in niche commodity-processor companies or in banks that specialised in hedging project risk for natural-resource companies. The contribution of this article is to help fill the knowledge gap in the risk management of commodity derivatives trading. More... |
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Interviews |
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Markets today bear essentially no resemblance to markets just ten years ago - an interview with Ekkehart Boehmer |
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In this month's interview, Ekkehart Boehmer, Professor of Finance at EDHEC Business School, discusses his research on execution and trading on equity markets, with a particular focus on high-frequency trading. He also talks about his research on short selling and the effectiveness of short selling bans. Before joining academia, Ekkehart Boehmer was Director of Research at the New York Stock Exchange and Senior Economist at the U.S. Securities and Exchange Commission. More...
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Features
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| What Asset-Liability Management Strategy for Sovereign Wealth Funds? |
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| In a call for reaction to an EDHEC-Risk Institute study entitled “Asset-Liability Management Decisions for Sovereign Wealth Funds,” which was the foundation paper of the research chair endowed by Deutsche Bank, we asked sovereign
investment practitioners about their views on the use of a dynamic ALM framework for SWF management. This report shows that practitioners appreciate the value of the approach. As far as the inclusion of liabilities is concerned, respondents agree that this is an important aspect as 92% of the practitioners in the survey think that implicit liabilities should be taken into account in an integrated framework.
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| Appointments |
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| Mr. Jean-Paul Villain of the Abu Dhabi Investment Authority joins EDHEC-Risk Institute's International Advisory Board |
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| EDHEC-Risk Institute is pleased to announce the appointment of Mr. Jean-Paul Villain, Director of the Strategy Unit at the Abu Dhabi Investment Authority (ADIA), to its international advisory board. The board brings together some forty senior representatives from regulatory bodies, leading pension funds, professional organisations and business partners to validate the relevance and goals of the research programme proposals presented by the Institute’s management and to evaluate research outcomes for their potential impact on industry practices. More... |
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| Indexes |
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| Style-related Comovement: Fundamentals or Labels? |
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| Brian H. Boyer. Financial institutions tend to gather assets sharing similar characteristics in a reduced number of categories, to make it easier for investors to allocate their funds. Thus, investors can allocate their portfolios based on asset style, rather than investigating individual assets. However, the style segregation rules can be somewhat arbitrary and some assets may be transferred from one group to another, even if fundamental values do not justify it. More... |
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| Indexes |
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| Professor Zipf goes to Wall Street |
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| Yannick Malevergne, Pedro Santa-Clara, Didier Sornette. Zipf (1949) established a result which had consequences on assessing the diversification of the market portfolio. He observed that the size of US firms ranked from the largest to the smallest is inversely proportional to its rank. This result corresponds to a heavy-tailed distribution of firm sizes. It was confirmed in different countries and using different measures of firm sizes. As a result, the market portfolio, which is weighted using firms’ market capitalisation, appears to be poorly diversified, as only the components having the highest rank in terms of capitalisation have a significant contribution in this index. More... |
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| Indexes |
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| Realized Volatility Indexes |
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| Andrew Clark. In this article the author first considers in turn the various hypotheses inherent to modern portfolio theory to see if they match the real market conditions. First of all, it is clear that investors invest at different time horizons. This is not without consequences on their investing objectives and the way they trade. This heterogeneity among investors has lead to the market being considered as fractal. More... |
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| Indexes |
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| Applications of Systematic Indexes in the Investment Process |
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| Dimitris Melas, Xiaowei Kang. In asset management, it is now widely recognised that many sources of risk other than that represented by the market portfolio can generate systematic returns. As cap-weighted indexes serve only to capture market risk, many indexes have recently been developed to capture other risk factors. All of these indexes rely on weighting schemes other than the well known capitalisation weighting suggested by portfolio theory. In this article, Melas and Kang choose to focus on so-called “systematic indexes”, indexes that capture systematic risk factors, and on the ways they can be used, for both strategic and tactical asset allocation, in portfolio management.
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| Indexes |
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| Is the Market Portfolio Efficient When Investors Are Not Utility Maximisers? |
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| Véronique Le Sourd. The theoretical efficiency of the market portfolio is widely evoked by index providers to justify their cap-weighting indices, as cap-weighting is, according to financial theory, the optimal investment choice. Indeed, the market portfolio, defined as the optimal risky investment by Sharpe (1964) and Lintner (1965) in the capital asset pricing model (CAPM), is the cap-weighted combination of all available assets, including stocks, bonds, and not easily tradable assets such as human capital or real estate. More... |
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| Hedge Fund Performance |
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| Determinants and implications of fee changes in the hedge fund industry |
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| V. Agarwal and S. Ray According to the authors, fees are usually considered in the hedge fund literature as fixed fees once an investment is made. However, by using historical data on changes in management fees, incentive fees, and high water mark, the authors find that about 8% of the funds that they study exhibit at least one change in their fee structure. Then the paper examines two issues related to changes in hedge fund fees: first, the determinants of fee changes, second, the effects of fee changes on future performance and capital flows from investors. More... |
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| Indexes |
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| Far from the Madding Crowd – Volatility Efficient Indices |
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| Frank Nielsen, Raman Aylursubramanian. Nielsen and Aylursubramanian note a recent rise in the popularity of minimum variance strategies and propose to develop a global minimum volatility index to serve as a benchmark for evaluating these strategies. Initially introduced by Markowitz (1952), the minimum variance (MV) portfolio is not only the efficient frontier portfolio with the lowest risk for a given set of assets, but also the one that can be computed without estimating expected asset returns. More... |
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| Indexes |
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| The Performance of Actively Managed Exchange-traded Funds |
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| Gerasimos G. Rompotis. In this article, the author evokes the evolution of ETF characteristics. Historically, Exchange-Traded Funds (ETFs) were created to replicate the performance of indexes. The first ETF was created in 1993 in the United-States to track the S&P 500 Index. Nowadays, more than 1,000 ETFs are available in the U.S. for replicating all kind of indices. More recently, different kinds of ETFs were created that do not restrict to replicate the performance of and index, but rather try to outperform this performance, using active management. More... |
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| Alternative Investments |
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| Diversification in Funds of Hedge Funds: Is it Possible to Overdiversify? |
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| Stephen J. Brown, Greg N. Gregoriou, Razvan Pascalau Samuelson (1967) argues that as a general matter it is easy to show that investors should be maximally diversified. For this reason many institutions are attracted to diversified portfolios of hedge funds, referred to as Funds of Hedge Funds (FOFs). In this paper we examine a new database that separates out for the first time the effects of diversification (the number of underlying hedge funds) from scale (the magnitude of assets under management). We find with others that the variance reducing effects of diversification peter out once FOFs hold more than 20 underlying hedge funds. Yet the majority of FOFs are more diversified than this. We find a new and surprising result that this excess diversification actually increases the left tail risk exposure of FOFs particularly once we account for the extent to which hedge fund returns are smoothed. A revisited version of this paper is forthcoming in the Review of Asset Pricing Studies. More... |
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| Derivatives |
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| Idiosyncratic Risk and the Cross-Section of Stock Returns |
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| Rene Garcia, Daniel Mantilla-Garcia, Lionel Martellini Idiosyncratic volatility has received considerable attention is the recent financial literature. 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. We revisit these questions from a novel perspective, by taking the cross-sectional variance of stock returns as a measure of average idiosyncratic
variance. More... |
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| Risk Management |
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| How to Construct Fundamental Risk Factors? |
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| Georges Hübner, Marie Lambert This paper proposes an alternative way to construct the Fama and French (1993) empirical risk factors. Without losing in significance power, in beta consistency or in factor efficiency compared to the Fama and French factors, our technique insulates the effects of other sources of risk as much as possible when evaluating one risk factor. More... |
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| Derivatives |
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| Force-fitting CDS Spreads to CDS Index Swaps |
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| Dominic O’Kane Issues of contemporaneity, liquidity, different restructuring clauses and market supply and demand, all contribute to the fact that the market quoted term structure of CDS index spreads does not always agree with the term structure of CDS index spreads implied by the CDS term structures of the constituent credits. A revisited version of this paper was published in the Spring 2011 issue of the Journal of Derivatives. More... |
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| Credit Default Swaps |
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| The Link between Eurozone Sovereign Debt and CDS Prices |
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| Dominic O’Kane This paper 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. It first presents a simple model which establishes the no-arbitrage relationship between CDS and bond yield spreads. More... |
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| Risk Management |
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| Sensitivity of portfolio VaR and CVaR to portfolio return characteristics |
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| Stoyan V. Stoyanov, Svetlozar T. Rachev, Frank J. Fabozzi Risk management through marginal rebalancing is important for institutional investors due to the size of their portfolios. This paper considers the problem of marginally improving portfolio VaR and CVaR through a marginal change in the portfolio return characteristics. It studies the relative significance of standard deviation, mean, tail thickness, and skewness in a parametric setting
assuming a Student's t or a stable distribution for portfolio returns. A revisited version of this paper is forthcoming in Annals of Operations Research. More... |
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| Risk Management |
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| Risk Parity – Rewards, Risks and Research Opportunities |
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| Barry Schachter, S. Ramu Thiagarajan Mean-Variance optimisation has come under great criticism recently, based on the poor performance experienced by asset managers during the global financial crisis. In response, an alternative approach, called Risk Parity, which proceeds by equalising risk contributions, has garnered much interest. This paper summarises the work of a group of leading researchers on Risk Parity. A revisited version of this paper was published in the Spring 2011 issue of the Journal of Investing. More... |
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| Performance |
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| Why Does an Equal-Weighted Portfolio Outperform Value- and Price-Weighted Portfolios? |
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| Yuliya Plyakha, Raman Uppal, Grigory Vilkov This paper compares the performance of equal-, value-, and price-weighted portfolios of stocks in the major U.S. equity indices over the last four decades. It finds that the equal-weighted portfolio with monthly rebalancing outperforms the value- and price-weighted portfolios in terms of total mean return, four factor alpha, Sharpe ratio, and certainty-equivalent return, even though the equal-weighted portfolio has greater portfolio risk. More... |
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| Risk |
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| Market Risks in Asset Management Companies |
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| Bernd Scherer This paper shows that revenues from a sample of publicly traded US asset management companies carry substantial market risks. Not only does this challenge the academic risk management literature about the predominance of operative risks in asset management. It also is at odds with current practice in asset management firms. Asset managers do not hedge market risks even though these risks are systematically built into the revenue generation process. A revisited version of this paper is forthcoming in Quantitative Finance. More... |
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| Alternative Investments |
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| Solvency II: A unique opportunity for hedge fund strategies |
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| Mathieu Vaissié There is growing empirical evidence that the complexity of financial markets makes it increasingly challenging for institutional investors to manage their asset/liability profile efficiently. Changes in the regulatory framework and in accounting rules make it even trickier for insurance companies. Against this backdrop, insurers have no choice but to rethink their overall investment policy. More... |
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| FTSE EDHEC-Risk Efficient Indexes: April 2012
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| EDHEC-Risk Alternative Indexes: March 2012
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| EDHEC-Risk IEIF Commercial Property: April 2012
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