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 "ETF and Passive Investment Strategies" Research Chair Rothschild & Cie "Active Allocation to Smart Factor Indices" Research Chair Index Regulation and Transparency ERI Scientific Beta Performance and Risk Reporting Hedge Fund Performance 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 Société Générale Prime Services (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 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 Smart Beta Day 2015, New York, 15 December, 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 CFA Institute/EDHEC-Risk Advances in Asset Allocation Seminar, London, 17-19 November, 2015 Contact EDHEC-Risk Executive Education Contact Us ERI Scientific Beta
    Mind the Gap    

On July 31 next, I will be stepping down as the head of EDHEC Risk Institute, which I set up in 2001. The 15 years that I have spent in an institution whose goal is not to maximise the number of academic publications but to transfer the results of academic research to the industry have

been very stimulating. With my colleagues at EDHEC Risk Institute, and in particular Lionel Martellini, who is succeeding me as the head of institute, I have the feeling that we have contributed to reducing the gap between industry practices and the results of academic research. More...

Industry Analysis
Human Capital
How to gauge the most valuable and most mysterious asset, human capital
Human capital is the most valuable asset of an individual but it is still neglected and ill-understood despite having been studied since the early 70’s. “Human capital, that colossal collection of assets, is also the most mysterious: illiquid, trading in no market, unverifiable in value, yet surely it has an immense influence on all investment decisions and the macro economy”. For example, in the United States, human capital represents an overwhelming majority (nearly 90%) of the assets (including home equity and private business) of young investors (under 30), and still a sizeable proportion (nearly 50%) for people aged between 51 and 60. Human capital is estimated to constitute 82% of Norway's wealth per capita, far greater than its petroleum wealth.  More...
Risk and Asset Management Research
EDHEC-Risk Institute Research Insights - IPE Supplement Spring 2015
The spring 2015 issue of the Research Insights supplement to Investment & Pensions Europe is an ‘EDHEC-Risk Days Special’ that ties in with the flagship conference presented by EDHEC-Risk Institute in London in March 2015. We begin by exploring the economic rationale behind the various "factors" in the equity space. Rather than accepting new factors based on back-tested performance improvements, investors may be better advised to assess the theoretical groundings behind a factor. Having a convincing explanation should be a key requirement for investors when they decide to gain exposure to a given factor, as a theoretical justification of an observed effect provides some safeguard against data-mining. More...
EDHEC-Risk News
Asset Management Education
2015/2016 seminars for the PhD in Finance programme unveiled
Finance professionals participating in the EDHEC PhD in Finance programme will have access to a choice of electives in 2015/2016, during which some of the world’s leading specialists will present their latest research advances in specific fields including portfolio and asset allocation, asset management, yield curve, volatility modelling. The 2015/2016 elective courses form a balanced portfolio of seminars presenting conceptual advances and state-of-the-art quantitative methods. The seminar on portfolio allocation is devoted to the econometric issues that arise in implementing portfolio choice problems; PhD candidates will be introduced to advanced topics in predictive modelling as it applies to financial time series and to modern asset allocation theories focusing on recent developments.  More...
EDHEC-Risk Publications
Indexes and Benchmarking
Investor Interest in and Requirements for Smart Beta ETFs
Felix Goltz, Véronique Le Sourd Exchange-traded funds (ETFs) are perhaps one of the greatest financial innovations of recent years. Unlike conventional index funds, ETF units trade on stock exchanges at market-determined prices, thereby combining the advantages of mutual funds and common stocks. Most of them represent passive instruments designed to track the performance of a financial index as closely as possible. Recently, the standard practice of using a capitalisation-weighting scheme for the construction of indices has been the target of harsh criticism. Nowadays, growing demand for indices as investment vehicles has led to innovations including new weighting schemes and alternative definitions of sub-segments. More...
   Not only long overdue but vital for successful investment - an interview with Thierry Déau  
  In this month's interview, we speak with Thierry Déau, CEO of Meridiam, about the second research publication from the Meridiam/Campbell-Lutyens research chair at EDHEC-Risk Institute, which presents a pricing model for unlisted infrastructure equity investments, the major issues involved in data collection, the launch of the Long-Term Investors in Infrastructure Association (LTIIA) and future development of the infrastructure sector.  More...  
The Valuation of Privately-Held Infrastructure Equity Investments: Theoretical Framework and Data Collection Requirements
This paper proposes a valuation framework for privately-held and very illiquid assets such as equity stakes in infrastructure projects. Such a framework is one of the key steps identified by EDHEC-Risk Institute as part of a roadmap to design long-term infrastructure investment benchmarks that can take into account the nature of such assets as well as the paucity of available data. Indeed, the design of an academically validated valuation framework, while necessary to ensure adequate performance measures, is constrained by the practical limitations of collecting private information that is scattered amongst many investors and is often confidential in nature. 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
Exchange-Traded Funds
Frédéric Ducoulombier invited to speak on smart beta at The Asset ETF Asia Summit 2015
Frédéric Ducoulombier, Founding Director, EDHEC Risk Institute - Asia, will be participating as a panellist in the session entitled "In focus: The smart beta debate" at The Asset ETF Asia Summit 2015, a one-day strategic event which aims to bring together policymakers and leaders in the ETF market in a full-day, high-level discussion of the key issues, challenges and opportunities in the Asian ETF market.  More...
Frank Fabozzi receives James R. Vertin Award from CFA Institute Research Foundation
Frank J. Fabozzi, Professor of Finance at EDHEC Business School and a member of the EDHEC-Risk Institute, has been awarded the James R. Vertin Award by the CFA Institute Research Foundation, a not-for-profit organization that sponsors independent research for investors and investment professionals around the world. He was recognized for producing a relevant and valuable body of research that has contributed to the investment profession.  More...
Sivagaminathan Sivasubramanian, Quantitative Research Analyst at EDHEC-Risk Institute, awarded research prize by EDHEC Business School for best research work on smart beta
Sivagaminathan Sivasubramanian, Quantitative Research Analyst at EDHEC-Risk Institute, was awarded the research prize for the best research work on smart beta at the EDHEC Master graduation ceremony that was held on June 6, 2015 at EDHEC Business School’s campus in Lille for his thesis entitled, "Active Allocation of Smart Beta Indices based on Factor Timing and Regime Switching".  More...
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...
EDHEC-Risk Publications
Comparing Different Regulatory Measures to Control Stock Market Volatility: A General Equilibrium Analysis
Adrian Buss, Bernard Dumas, Raman Uppal, Grigory Vilkov In this paper, we compare the effects of different regulatory measures used to reduce excess volatility of stock-market returns, which is generated by investors trading on sentiment. The regulatory measures we study are the Tobin tax, shortsale constraints, and leverage constraints. The main contribution of our research is to evaluate these regulatory measures within the same dynamic, stochastic general equilibrium model of a production economy, so that one can compare both the direct and indirect effects of the different measures on the financial and real sectors within the same economic setting.  More...
Asset Pricing
A Predictive System with Heteroscedastic Expected Returns and Economic Constraints
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. The implications of the modified system are consistent with well established empirical facts of stock returns, in particular, the simpler version of the modified system without predictors can explain the well documented countercyclicality of the dividend-price ratio’s predictive power.  More...
Indexes and Benchmarking
The Risks of Volatility ETNs: A Recent Incident and Underlying Issues
Felix Goltz, Stoyan Stoyanov Getting volatility exposure has become easier for investors after the relatively recent introduction of volatility ETNs (exchange-traded notes) and volatility ETFs (exchange-traded funds) and some of these products have enjoyed a surge in popularity. This paper uses the recent crisis with TVIX – a volatility ETN – to underline important differences between ETNs and ETFs which appear to be at the source of the observed market distortion. A revisited version of this paper was published in the Fall 2013 issue of the Journal of Index Investing. More...
Institutional Investment
Towards Better Consideration of Pension Liabilities in European Union Countries
François Cocquemas The goal of this study is to provide a broad picture of explicit and implicit pension liabilities in the EU-27 countries’ pension systems, together with an assessment of the risks each of them face. As structural deficits become a target in the Eurozone and beyond, it is fundamental to evaluate the extent to which the increasing funding needs, and the decreasing funding basis of public pensions, could add to public deficits.  More...