EDHEC-Risk Concept Industry Analysis Featured Analysis Latest EDHEC-Risk Surveys Features Interviews Indexes and Benchmarking FTSE EDHEC-Risk Efficient Index Series FTSE EDHEC-Risk ERAFP SRI Index EDHEC-Risk Alternative Indexes EDHEC-Risk IEIF Commercial Property Indices Hedge Fund Index Research Equity Index Research Amundi ETF "Core-Satellite and ETF Investment" Research Chair Rothschild & Cie "Active Allocation to Smart Factor Indices" Research Chair EDHEC-Risk Institute Solvency II Benchmarks Index Regulation and Transparency ERI Scientific Beta Performance and Risk Reporting Hedge Fund Performance EuroPerformance/EDHEC-Risk Institute Style Ratings Performance Measurement for Traditional Investment CACEIS "New Frontiers in Risk Assessment and Performance Reporting" Research Chair Asset Allocation and Alternative Diversification Real Assets Meridiam Infrastructure/Campbell Lutyens "Infrastructure Equity Investment Management and Benchmarking" Research Chair Natixis "Investment and Governance Characteristics of Infrastructure Debt Instruments" Research Chair 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 Asset Allocation and Derivative Instruments Volatility Research Eurex "The Benefits of Volatility Derivatives in Equity Portfolio Management" Strategic Research Project SGCIB "Structured Investment Strategies" Research ALM and Asset Allocation Solutions ALM and Private Wealth 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 Lyxor "Risk Allocation Solutions" Research Chair Merrill Lynch Wealth Management "Risk Allocation Framework for Goal-Driven Investing Strategies" Research Chair Ontario Teachers' Pension Plan "Advanced Investment Solutions for Liability Hedging for Inflation Risk" Research Chair Russell Investments "Solvency II" Research Chair Non-Financial Risks, Regulation and Innovations Risk and Regulation in the European Fund Management Industry Index Regulation and Transparency Best Execution: MiFID and TCA Mitigating Hedge Funds Operational Risks FBF "Innovations and Regulations in Investment Banking" Research Chair EDHEC-Risk Publications All EDHEC-Risk Publications EDHEC-Risk Position Papers IPE EDHEC-Risk Institute Research Insights AsianInvestor EDHEC-Risk Institute Research Insights P&I EDHEC-Risk Institute Research for Institutional Money Management Books EDHEC-Risk Newsletter Events Events organised by EDHEC-Risk Institute EDHEC-Risk Days Europe 2015, London, 24-25 March, 2015 EDHEC-Princeton Institutional Money Management Conference 2015, New York, 23 April, 2015 Events involving EDHEC-Risk Institute's participation EDHEC-Risk Institute Presentation Research Programmes Research Chairs and Strategic Research Projects Partnership International Advisory Board Team EDHEC-Risk News EDHEC-Risk Newsletter EDHEC-Risk Press Releases EDHEC-Risk in the Press Careers EDHEC Risk Institute-Asia EDHEC Business School EDHEC-Risk Executive Education EDHEC-Risk Institute PhD in Finance Yale School of Management - EDHEC-Risk Institute Certificate in Risk and Investment Management Yale SOM-EDHEC-Risk Alternative Investments II Seminar, London, 24-25 February, 2015 Yale SOM-EDHEC-Risk Alternative Investments II Seminar, New Haven, 3-4 March, 2015 Investment Management Seminars CFA Institute/EDHEC-Risk Advances in Asset Allocation Seminar, London, 3-5 February, 2015 Masterclass on Individual Investor Solutions, London, 23 March, 2015 Masterclass on New Frontiers in Risk Allocation and Factor Investing, New York, 22 April, 2015 CFA Institute/EDHEC-Risk Advances in Asset Allocation Seminar, New York, 7-9 July, 2015 Contact EDHEC-Risk Executive Education Contact Us ERI Scientific Beta
    Benchmarking long-term investment in infrastructure    

Matching the huge demand for capital investment in infrastructure projects around the world with the available supply of long-term funds by institutional investors—be they pension funds, insurers or sovereign wealth funds—has never been so high on the international policy agenda. This policy momentum, illustrated by the recent focus on long-term investment in infrastructure

by the G20, coincides with the steadily growing investment appetite from institutional investors for unlisted and illiquid assets. However, solid evidence supporting the infrastructure investment narrative is still missing, and full-fledged investment solutions demonstrating the benefits of infrastructure investment for institutional investors remain elusive. More...

Industry Analysis
Fixed-income performance attribution analysis and other performance evaluation approaches
Clients of asset management firms need to have more information than merely whether or not a portfolio manager outperformed a benchmark and by how much. They need to know the reasons why a portfolio manager realized the performance relative to the benchmark which can be either a bond index, smart beta, or a customized index More...
Financial regulation: comparing different measures to control stock market volatility
Whenever there is a crisis in financial markets, there is a call for greater regulation of these markets and the financial institutions that operate in these markets. It is not clear, however, whether more tightly regulated markets would also be more stable, or whether they would function better than those that are less tightly regulated. In fact, Lo (2012) reviews twenty-one books on the crisis, of which eleven are written by academics and ten by journalists and a former Treasury Secretary, and finds that there is little agreement across these books, with the books disagreeing about the events characterizing the financial crises, the factors explaining the cause of the crisis, and hence, the appropriate measures to deal with the crisis. More...
EDHEC-Risk News
Asset Management Education
PhD in Finance welcomes new class
Thirteen executive participants have joined the October 2014 class of the EDHEC-Risk Institute PhD in Finance. They come from three continents and represent ten countries, have fourteen years of professional experience on average and work in wealth and asset management, corporate and investment banking, and for a financial supervisory authority. The practitioners who join the executive track of the programme typically embark on the PhD in Finance to take a step towards senior positions in finance or, when they already hold such positions, to steer their organisations in new directions. More...
EDHEC-Risk Publications
Risk Management
Towards Conditional Risk Parity — Improving Risk Budgeting Techniques in Changing Economic Environments
Lionel Martellini, Vincent Milhau, Andrea Tarelli This paper introduces three distinct conditional risk parity strategies, explicitly designed to optimally respond to changes in state variables that have been used in the literature as proxies for the stochastically time-varying opportunity set. In an empirical analysis, the paper documents the superiority in various economic regimes of such conditional risk parity strategies with respect to standard unconditional risk parity techniques.  More...
   Passive investment can add much more value than it does today - an interview with Noël Amenc  
  In this month's interview, we speak with Noël Amenc, Professor of Finance at EDHEC Business School, Director of EDHEC-Risk Institute and CEO of ERI Scientific Beta, about passive investment in general and smart beta investing in particular. The recent report from the Financial Services User Group, which advises the European Commission in the preparation of legislation or policy initiatives which affect the users of financial services, reveals that European investment management does not create much value, that few active managers outperform indices, and that even fewer persist in their outperformance. More...  
Superannuation v2.0: Towards the next generation of pension funds in Australia
Numerous surveys suggest that Australians are not completely satisfied with Superannuation as it exists today. First, fund members tend to think that they will not have enough to retire and second, that investment plan providers are not necessarily acting in their best interest. In this context, we asked in a recent study supported by AXA Investment Managers whether the recent rapid development of self-managed superannuation funds (SMSFs) may be related to the level of dissatisfaction with the more mainstream types of pension funds (retail, industry and non-profit) especially amongst the relatively more financially literate and wealthier segment of the population. More...
Industry Analysis
Behavioural Finance
Value or Growth: The Genes of Investment Style
In addition to their ancestry, individuals also inherit financial genes, which have a significant and long-lasting effect on their approach to investing throughout their careers. A significant portion (30%) of the variation in risk taking of individuals is explained by their genetic makeup. This “financial DNA” is an important factor alongside characteristics such as education, age, gender or level of wealth. Recent studies have shed new light on the value/growth debate by virtue of the nature versus nurture debate.  More...
Asset Management
The Tobin tax – legal obstacles making matters worse?
The proposed Financial Transaction Tax (FTT) that is being driven by 11 countries in the EU, and is widely referred to as the “Tobin Tax” or “Robin Hood” tax, has been ruled illegal by the European Union’s own lawyers. But, rather than aborting the tax, this could lead to something much worse. The legal service of the European Council that represents member states has pointed out that a central aspect of the plan would exceed member states’ tax powers under international law, would infringe on the rights of member states that had not agreed to the tax, and could breach competition rules. More...
Risk and Asset Management Research
EDHEC-Risk Institute Research Insights - IPE Supplement Winter 2014
The winter 2014 edition of EDHEC-Risk Institute’s Research Insights supplement in co-operation with Investment & Pensions Europe addresses what we consider to be some of the key topics of importance for institutional investors today. Our first article, drawn from the Russell Investments research chair at EDHEC-Risk Institute on Solvency II, looks at the treatment of bond investment within the framework of the Solvency II Directive.  More...
EDHEC-Risk News
Wealth Management
EDHEC-Risk Institute to present masterclass on individual investor solutions in London
EDHEC-Risk Institute will be holding a special masterclass on individual investor solutions entitled "Advanced Techniques for Wealth and Retail Investments" on March 23, 2015 at The Brewery in London. Like institutional investors, individual investors do not just need investment products with allegedly superior performance. They need investment solutions that help them meet their goals subject to a number of dollar and risk budget constraints. More...
Executive Education
EDHEC-Risk Days 2015 to take place on March 24-25, 2015 at the Brewery in London
The EDHEC-Risk Days conference 2015 will take place on March 24-25, 2015 at the Brewery in London and will present the results of EDHEC-Risk research on themes of great interest to the institutional investment and fund manager communities. The 2015 conference is a two-day event focusing on new frontiers in risk allocation and investment management that will allow investment professionals to review major industry challenges, explore state-of-the-art investment techniques and benchmark practices to research advances.  More...
Executive Education
New Yale School of Management–EDHEC-Risk Institute executive seminar unveiled
In the wake of the successes of the “Strategic Asset Allocation and Investment Solutions” and “Equity Investment” seminars – which drew over one hundred and fifty participants – EDHEC-Risk Institute and Yale School of Management have unveiled their third joint executive seminar. Looking at “Fixed Income Investment”, the new seminar will feature EDHEC-Risk PhD in Finance core faculty member Professor Frank Fabozzi, Chueng Kong Graduate School of Business Chair Professor of Finance Li Haitao and EDHEC Business School Affiliated Professor of Finance Dominic O’Kane.  More...
Executive Education
Yale School of Management – EDHEC-Risk executive seminar series to continue in Q1 2015
The highly successful executive seminar series organised by Yale School of Management and EDHEC-Risk Institute is set to continue in the first quarter of 2015. The seminar series, which allows participants to obtain the prestigious Certificate in Risk and Investment Management, will resume with the two-day Yale SOM-EDHEC-Risk Alternative Investments Seminar at the EDHEC-Risk Institute campus in London on February 24-25, 2015 and the Yale campus New Haven, Connecticut on March 3-4, 2014. More...
EDHEC-Risk Publications
Indexes & Benchmarking
The Impact of Risk Controls and Strategy-Specific Risk Diversification on Extreme Risk
Lixia Loh, Stoyan Stoyanov To overcome the deficiencies of cap-weighted indices, smart beta strategies have been proposed. They employ weighting schemes that deviate from cap-weighting, deal with the problem of concentration and allow for a flexible index construction process in which the index can be tilted to better rewarded factors. Along with the better risk-adjusted performance, however, investors in smart beta strategies are exposed to additional risks.The goal of this paper is to check empirically if controlling the exposure to some risks such as country, sector, tracking error, or sample risk does not increase the exposure to other types of risk, such as tail risk, that may remain unaccounted for by the index construction process.  More...
Asset Pricing
Stock Return Predictability of Cross-Market Deviations in Option Prices and Credit Default Swap Spreads
Georgios Angelopoulos, Daniel Giamouridis, Georgios Nikolakakis Cross-market deviations in (deep out-of-the-money) equity put option prices and credit default swap spreads of the same firm are temporary and predict future movements in the put options and credit default swaps (Carr and Wu, 2011). We document that these deviations are only temporary and the prices of the two insurance contracts revert to their usual level shortly after they occur, on average within about one week. The process of reversion involves changes in the CDS and the equity option, and, as we show for the first time, also involves largely predictable changes in the equity values of the reference firm. The predictability we document is an integral, yet unattended, component of the predictability of cross-market deviations documented in previous work.  More...
Revisiting Mutual Fund Performance Evaluation
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. Ignoring the self-reported benchmark results in different measurement of stock selection and timing components of excess performance. This paper revisits baseline empirical evidence in mutual fund performance evaluation utilising stock selection and timing measures that incorporate the self-reported benchmark.  More...
Risk Management
Robust Risk Estimation and Hedging: A Reverse Stress Testing Approach
Yaacov Kopeliovich, Arcady Novosyolov, Daniel Satchkov, Barry Schachter This paper proposes a novel method for reverse stress testing. The process starts with a multivariate normal distribution and uses Principal Components Analysis (PCA) along with Gram-Schmidt orthogonalization to determine scenarios leading to a specified loss level. The approach is computationally efficient. The method includes the maximum likelihood scenario, maximizes (a definition of) representativeness of the scenarios chosen, and measures the plausibility of each scenario. More...