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 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 Rothschild & Cie "The Case for Inflation-Linked Corporate Bonds: Issuers' and Investors' Perspectives" 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 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 Investment Management Seminars Understanding, Designing and Testing Quantitative Risk Models Seminar, Singapore, 20 August, 2014 Contact EDHEC-Risk Executive Education Contact Us ERI Scientific Beta
    It's time to take the risk of smart beta into account    

Smart beta has been a great success for several years now, both in business terms and from a financial point of view, since the performances that were announced on the basis of track records have now been confirmed. This success corresponds to the development of new indices and also the change of paradigm in the passive investment industry, which, from an objective of replicating the average performance of the market that is given by cap-weighted indices, has moved

on today to a promise of outperformance. Naturally, this change in paradigm in investment that is termed passive is not without its consequences. Certain major players in index investment do not wish these new forms of indices to be considered passive investment, by defining passive investment as investment that is not supposed to have any index rebalancing (passive = static) and that, especially, should only reflect the average performance of the market. More...

   
 
Industry Analysis
Indexes & Benchmarking
Why factors matter
Sophisticated institutional investors have started to review factor-based investment strategies. For example, the Parliament of Norway, which acts as a trustee for the Norwegian Oil Fund, commissioned a report on the investment returns of the fund. This report was requested after the fund’s performance fell short of the performance of popular equity market benchmarks. The resulting report (Ang, Goetzmann and Schaefer 2009) showed that the returns relative to a cap-weighted benchmark of the fund’s actively-managed portfolio can be explained by exposure to a set of well-documented alternative risk factors. After taking into account such exposures, active management did not have any meaningful impact on the risk and return of the portfolio.  More...
Risk and Asset Management Research
EDHEC-Risk Institute Research Insights - IPE Supplement Summer 2014
In the summer 2014 issue of the Research Insights supplement to Investment & Pensions Europe we aim as ever to provide European institutional investors with an academic research perspective on the most relevant issues in the industry today. We report on the results of a survey of European institutional investors conducted by EDHEC-Risk Institute on their perceptions and expectations with respect to the governance and transparency of indices. The survey shows that institutional investors are not particularly impressed by the current level of transparency in the indexing industry and reveals that end-users strongly support higher standards of index transparency. More...
EDHEC-Risk News
Asset Management Education
PhD in Finance: Lifelong Learning Option, New Funding Schemes Introduced
With a view to increasing the learning and networking opportunities available to PhD in Finance programme students and alumni and to facilitating the participation of professionals who are unable to fully fund programme expenses out of their own resources, EDHEC-Risk Institute is introducing a lifelong learning option to its doctoral programme and expanding its financial assistance schemes.  More...
EDHEC-Risk Publications
Infrastructure Investment
Benchmarking Long-Term Investment in Infrastructure: Objectives, Roadmap and Recent Progress
Frédéric Blanc-Brude This paper proposes an approach to benchmark long-term investments in infrastructure, where long-term investment simply refers to any unlisted and illiquid asset. It first highlights the reasons why benchmarking long-term infrastructure investments has become a sine qua non to match the supply and demand of long-term capital, improve asset allocation outcomes for investors and support the development of the economy.  More...
 
Interviews
   There are still too few pension funds putting risk management at the heart of their investment strategy - an interview with Cynthia Sweeney Barnes, Sophie Debehogne and Thomas Heckel  
   
  In this month's interview, we speak to Cynthia Sweeney Barnes, Head of EMEA & Global Segments; Sophie Debehogne, Investment Specialist Customised & Fiduciary Solutions within the Multi Asset Solutions team; and Thomas Heckel, Head of Financial Engineering with BNP Paribas Investment Partners, about the EDHEC-Risk Institute publication, "Dynamic Liability-Driven Investing Strategies: The Emergence of a New Investment Paradigm for Pension Funds?" produced as part of the BNP Paribas Investment Partners research chair, the risk management approaches of pension funds, and BNP Paribas Investment Partners' approach to institutional markets in Europe.  More...  
Features 
 
Dynamic Liability-Driven Investing Strategies: The Emergence of a New Investment Paradigm for Pension Funds?
A number of profound changes have taken place, which have collectively led to the emergence of a new investment paradigm for pension funds. The standard paradigm for pension fund investments, which used to be firmly grounded around one overarching foundational concept of the policy portfolio, is slowly but surely being replaced by a new, more modern, investment paradigm known as the dynamic liability-driven investing (DLDI) paradigm. 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
Awards
Two EDHEC students win the French Society of Financial Analysts (SFAF) prize in the International Competition of Master Degree Theses on Economics and Finance
The recipients of the prize were EDHEC students Sylvain Bourrat, an auditor with KPMG in Paris, and Guillaume Wolff, an investment banking analyst with Deutsche Bank in London, for Best Thesis on Economics and Finance in Paris on 5 June, 2014. The two 2013 graduates of the EDHEC Financial Economics track and final-year students on the MSc in Corporate Finance focused their thesis on a subject of ongoing debate, namely the impact of private equity funds on the performance of companies over which they exert a significant influence, entitled “Underpricing & Long‐Term Performance of Private‐Equity Backed IPOs compared to Non‐Private‐Equity Backed IPOs: A French perspective”.  More...
Asset Management Education
PhD in Finance programme adds six alumni
Over the course of the last six months, six EDHEC-Risk Institute PhD candidates have successfully defended their dissertations. Their research work brings new insights on strategic and tactical asset allocation, inflation modelling and hedging, asset pricing, corporate financial policy, pension fund management, and systemic risk. These new graduates include two women and four men representing five countries on three continents (France, Germany, Italy, Singapore and the United States). The group includes five participants who belonged to the European chapter of the programme and the first graduate of its Asian chapter launched in 2011.  More...
Executive Education
CFA Institute–EDHEC-Risk Institute flagship seminar turns seven
In 2008, CFA Institute and EDHEC-Risk Institute partnered to offer advanced executive education programmes to senior investment industry professionals and introduced what remains their flagship programme, the three-day “Advances in Asset Allocation” seminar. Since then, the seminar has trained close to six hundred senior executives and investment officers in the concepts and techniques needed to optimise asset allocation and risk management via diversification, hedging, and insurance.  More...
Asset Management Education
PhD in Finance candidates and alumni contribute to success of EDHEC-Risk Days
Since 2004, the EDHEC-Risk Days have been giving finance practitioners access to some of the latest research advances in the fields of investment and risk management and allowed them to discuss the implications and applications of new concepts and results with the Institute’s research team. Since 2010, as part of the EDHEC-Risk Days, the PhD Forum has allowed students and graduates of the EDHEC-Risk Institute PhD in Finance programme to engage industry practitioners about their dissertation work.  More...
EDHEC-Risk Publications
Performance
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...
Financial Modelling
A Binomial-Tree Model for Convertible Bond Pricing
Krasimir Milanov, Ognyan Kounchev, Frank J. Fabozzi, Young Shin Kim, Svetlozar T. Rachev This article derives a binary tree–based model for convertible bond valuation subject to credit risk modeling. The model, which belongs to the framework known as equity to credit risk, is based on the so-called reduced-form (constant intensity of default model for the underlying) and so-called synthesis (variable intensity of default model for the underlying) credit risk models.  More...
Asset Pricing
Asset Prices with Heterogeneity in Preferences and Beliefs
Harjoat S. Bhamra, Raman Uppal This paper studies asset prices in a dynamic, continuous-time, general-equilibrium endowment economy where agents have power utility and differ with respect to both beliefs and their preference parameters for time discount and risk aversion. It solves in closed form for the following quantities: optimal consumption and portfolio policies of individual agents; the riskless interest rate and market price of risk; the stock price, equity risk premium, and volatility of stock returns; and, the term structure of interest rates. More...
Volatility
The Relevance of Country- and Sector-specific Model-free Volatility Indicators
Lixia Loh, Lionel Martellini, Stoyan Stoyanov This paper tests for the presence of local volatility factors using model-free volatility indicators in contrast to the classical model-dependent approach through GARCH-type processes. It employs three different model-free methodologies – model-free option implied volatility (MFOI), realised volatility, and cross-sectional volatility (CSV).  More...

Top