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 EDHEC-Risk Institute Solvency II Benchmarks 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 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 Benchmarks" 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, New Haven, 3-4 March, 2015 Investment Management Seminars 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, 14-16 July, 2015 Contact EDHEC-Risk Executive Education Contact Us ERI Scientific Beta
    Masterclass on Individual Investor Solutions    

Individual investors’ investment problems can be broadly summarised as a combination of various wealth and/or consumption goals, subject to a set of dollar budgets, defined in terms of initial wealth and future income, as well as risk budgets such as maximum drawdown limits for example. It is important to note that the success or failure of the satisfaction

of these goals subject to dollar and risk budgets does not critically depend upon the stand-alone performance of a particular fund nor that of a given asset class. It depends instead upon how well the performance on the investor's portfolio dynamically interacts with the risk factors impacting the present value of investor's goals. More...

   
 
Industry Analysis
Indexes and Benchmarking
Detecting True Factors in the Factor Zoo: Assessing the Economic Rationale behind Equity Factors
Index providers and asset managers have been prolific at creating equity strategies which tilt towards various “factors.” While early attempts at factor investing concentrated on the small cap and value factors, we have seen a proliferation of factors that are supposed to be captured by investment products, including momentum, carry, “quality,” and earnings revisions, to name but a few. Rather than accepting new factors based on the back-tested performance improvements they bring, investors may be well advised to assess the theoretical groundings, i.e. the economic rationale, underlying a factor.  More...
Institutional Investment
Accounting for pension liabilities via the liability-driven investing paradigm: from asset management to asset-liability management
The first and most important dimension to take into account when dealing with pension fund investment problems is the impact of the presence of pension liabilities on the allocation strategy. This question has naturally raised substantial attention in academic research, where it has given rise to the emergence of two separate strands of the literature. A first strand of the literature, mostly from the field of operations research, has focused on developing early comprehensive models of uncertainty in an asset-liability management (ALM) context, which have served a formal basis for the development of surplus optimisation methodologies. More...
EDHEC-Risk News
Asset Management Education
PhD in Finance candidates to present at EDHEC-Risk Days Europe 2015
As part of the EDHEC-Risk Days Europe conference, the PhD Forum is an opportunity to showcase the industry-oriented research conducted by participants in the EDHEC PhD in Finance programme. The EDHEC PhD in Finance is designed for professionals whose aim is to gain and maintain an in-depth understanding of finance, as well as the ability to initiate and carry through research projects that will yield original insights and lead to innovative approaches and offerings.  More...
EDHEC-Risk Publications
Asset Allocation
Should a Skeptical Portfolio Insurer use an Optimal or a Risk-Based Multiplier?
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. The question is addressed in the context of an investor maximising the long-term growth rate of wealth under a maximum drawdown constraint, and comparing the optimal strategy using the predictive system with a similar risk-based allocation strategy, independent of expected return estimates. More...
 
Interviews
   More institutions will be convinced to make the extra effort to contribute their data - an interview with Benjamin Sirgue  
   
  In this month's interview, we speak with Benjamin Sirgue, Global Head of Aviation, Export & Infrastructure Finance within the Structured & Asset Finance business line of Natixis Wholesale Bank, about the most recent publication from the Natixis research chair at EDHEC-Risk Institute, on unlisted infrastructure debt valuation and performance measurement, the challenges raised by data collection, and future research on the valuation and regulation of infrastructure debt products. More...  
Features 
 
Unlisted Infrastructure Debt Valuation and Performance Measurement
In a new paper entitled “Unlisted Infrastructure Debt Valuation and Performance Measurement”, drawn from the Natixis research chair at EDHEC-Risk Institute on the “Investment and Governance Characteristics of Infrastructure Debt Instruments,” we propose the first academically robust, yet operationally implementable valuation and risk measurement framework for illiquid infrastructure debt. 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
Risk Management
EDHEC-Risk Institute to present masterclass on risk allocation in New York
EDHEC-Risk Institute will be holding a special masterclass on risk allocation for policy and equity portfolios entitled "New Frontiers in Risk Allocation and Factor Investing" on April 22, 2015 at The Princeton Club in New York.  More...
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...
EDHEC-Risk Publications
Commodities
Commodity Risk Factors and Intertemporal Asset Pricing
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. Accordingly, factor-mimicking portfolios are formed by taking long positions in backwardated contracts and short positions in contangoed contracts according to either term structure, hedging pressure or momentum signals. The resulting portfolio returns are able to predict changes in the investment opportunity set of agents over long horizons in a way that is consistent with rational pricing by risk-adverse investors.  More...
Asset Pricing
Asset Prices in General Equilibrium with Transactions Costs and Recursive Utility
Adrian Buss, Raman Uppal, Grigory Vilkov This paper studies the effect of proportional transactions costs on asset prices and liquidity premia in a general equilibrium economy with multiple agents who are heterogeneous. The agents in the model have Epstein-Zin-Weil utility functions and can be heterogeneous with respect to endowments and all three characteristics of their utility functions—time preference, risk aversion, and elasticity of intertemporal substitution.  More...
Financial Modelling
Tempered Stable Ornstein-Uhlenbeck Processes: A Practical View
Michele Leonardo Bianchi, Svetlozar T. Rachev, Frank J. Fabozzi This paper studies the one-dimensional Ornstein-Uhlenbeck (OU) processes with marginal law given by the tempered stable and tempered infinitely divisible distributions proposed by Rosinski (2007) and Bianchi et al. (2010b), respectively. In general, the use of non-Gaussian OU processes is impeded by difficulty in calibration and simulation.  More...
Performance
The Alpha of a Market Timer
Georges Hübner Portfolio managers claim to be able to generate abnormal returns through either superior asset selection or market timing. The Treynor and Mazuy (TM) model is the most used return-based approach to isolate market timing skills, but all existing corrections of the regression intercept can be manipulated by a manager who can trade derivatives. This paper revisits the TM model by applying the original option replication approach proposed by Merton. It exploits both the linear and the quadratic coefficients of the TM regression to assess the replicating cost of the cheapest option portfolio with the same convexity. The application of the new correction on two samples of market timing funds delivers particularly encouraging empirical results.  More...

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