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EDHEC-Risk Institute Press Releases


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  • 15/12/11:
    Target-volatility strategies, a response to current investment dilemma
    Insurance companies and pension funds have traditionally played an important role as providers of long-term risk capital and, in a world of deleveraging credit institutions, are crucially needed to finance economic development. However, recent and forthcoming changes in accounting and prudential standards encourage long-term institutional investors to invest in low risk assets that are highly correlated with liabilities. Meanwhile, in the current low interest rate environment, institutional investors cannot meet their future obligations out of the yields on these instruments. At the same time, risk-based capital charges and financial reporting standards penalise assets that offer high risk premia and make it expensive for long-term investors to directly hold volatile assets. In a new study entitled “Structured Equity Investment Strategies for Long-Term Asian Investors” conducted with the support of Societé Générale Corporate & Investment Banking, Stoyan Stoyanov, Head of Research at EDHEC Risk Institute–Asia and Professor of Finance at EDHEC Business School, examines the dilemma of how to extract risk premia while limiting exposure to downside risks.

  • 15/12/11:
    EDHEC-Risk Institute announces “Solvency II Benchmarks” to assist European insurers with their allocation to equities
    At separate seminars in Paris and London on December 13 and 14, 2011, entitled “Solvency II Benchmarks: How to Implement an Optimal Equity Allocation within Solvency II,” EDHEC-Risk Institute presented the results of research carried out with the support of Russell Investments that has led to the development of risk management strategies that allow European insurance companies to keep a reasonable capital requirement while providing attractive products to policyholders. Putting in place these dynamic risk management strategies implies implementing partial internal models which capture insurance companies’ specific characteristics and in particular the benefits of these allocation strategies. Those benefits are several: responsiveness to changes in market environment, better exposure to the returns of the equity markets, and respect of Solvency II constraints. The benchmarks’ framework is public, totally transparent, well documented and grounded in a rules-based approach with solid, objective academic foundations. These features turn the benchmarks into an independent external reference that can be used as the bare bones for the development of partial internal models by insurance companies.

  • 03/11/11:
    EDHEC-Risk Institute research on corporate bond indices finds index construction methodologies unreliable
    New research at EDHEC-Risk Institute has concluded that corporate bond index construction methodologies tend to be sub-optimal. The research, entitled “A Review of Corporate Bond Indices: Construction Principles, Return Heterogeneity, and Fluctuations in Risk Exposures,” shows that credit and interest rate risk exposures are relatively unstable for the eight indices examined. This naturally has significant implications for investors' allocation decisions and for the consequences of those allocation decisions over time. The paper analyses two sets of four corporate investment-grade bond indices each, one for the US market and the other for the euro-denominated bond market. The authors, Felix Goltz, Head of Applied Research, and Carlos Heitor Campani, Research Assistant, EDHEC-Risk Institute, review the uses of bond indices and the challenges involved, and then analyse the risk-return properties and the heterogeneity of the indices in each set.

  • 25/10/11:
    EDHEC-Risk Institute study sheds new light on commodity investment and financialisation of commodity markets
    A number of policy-makers have blamed the decade-long rise in commodity prices and recent market volatility on the growing influence of financial investors and called for new regulation restricting their participation in commodity markets. Market financialisation has also led investors to worry about higher integration between commodity and traditional financial markets weakening the portfolio benefits of commodity investment. EDHEC-Risk Institute Professor Joëlle Miffre addresses these concerns in a study released today entitled “Long-Short Commodity Investing: Implications for Portfolio Risk and Market Regulation”, produced with market data and support from CME Group. The study first examines the performance and risk characteristics of long-only commodity index investments favoured by passive investors and of long/short commodity strategies of the kind implemented by hedge fund managers.

  • 17/10/11:
    In spite of their shortcomings and the development of alternative indices, cap-weighted and debt-weighted indices remain the reference for European institutional investors and asset managers
    In a new survey which elicited responses from 104 European institutional investment professionals, EDHEC-Risk Institute analyses the current uses of and opinions on equity and fixed-income indices. Among the most prominent results of the survey are that liquidity, objectivity and transparency are the most important quality criteria investors have for indices. However, respondents suggest that a buy-and-hold character is not a requirement for an index–only slightly more than 50% of respondents find it important or very important. This finding is interesting as the dominance of cap-weighted indices in various asset classes is often attributed to their buy-and-hold nature. This new attitude from investors opens the door to new approaches based on dynamic rebalancing rules, as long as these are transparent and systematic.

  • 04/10/11:
    EDHEC-Risk Institute research shows benefits of using ETFs in a dynamic core-satellite investment approach
    In a new study entitled “Capturing the Market, Value, or Momentum Premium with Downside Risk Control: Dynamic Allocation Strategies with Exchange-Traded Funds”, produced as part of the Amundi ETF research chair on “Core-Satellite and ETF Investment,” EDHEC-Risk Institute researchers have analysed the performance of risk-controlled dynamic asset allocation strategies and concluded that appropriate implementation of the Dynamic Core-Satellite approach can boost portfolio returns while keeping downside risk under control. Dynamic risk budgeting methodologies such as Dynamic Core-Satellite strategies are used to provide risk-controlled exposure to different asset classes. There is extensive evidence that investment strategies based on momentum and value are attractive for portfolio managers who seek outperformance. Momentum and value are among the most robust return drivers in the cross section of expected returns. In this study, the EDHEC-Risk researchers examine how to exploit the value and momentum anomalies using a Dynamic Core-Satellite investment model.

  • 01/09/11:
    EDHEC Finance Professors Frank J. Fabozzi and Ekkehart Boehmer Win Two Prestigious Awards
    Professor Fabozzi is co-recipient of the European Financial Management Best Paper Award for a paper entitled "Property Derivatives for Managing European Real-Estate Risk", which was co-authored with Professors Robert J. Shiller, from the Department of Economics, Cowles Foundation, and School of Management, Yale University, and Radu Tunaru, from the University of Kent. Professor Boehmer was among nine scholars to receive a Distinguished Referee Award from the Review of Financial Studies, one the most prestigious scientific journals dedicated to finance. The journal’s referee awards are meant to "honour those who contribute their time far above and beyond the call of duty to the Review of Financial Studies". Professor Boehmer was also invited by the Review of Financial Studies to serve as Associate Editor for a three-year period from July 2011.

  • 12/08/11:
    EDHEC-Risk Institute denounces short selling bans
    EDHEC-Risk Institute condemns the August 11 decisions by the financial market authorities in Belgium, France, Italy and Spain to impose or extend short-selling bans in the wake of renewed market volatility. These hasty decisions are not only devoid of theoretical basis, but also fly in the face of empirical evidence. Academic studies, including work by EDHEC-Risk Institute researchers, have documented the positive contribution of short-sellers to market efficiency and shown that constraining short sales significantly reduces market quality – by reducing liquidity and increasing volatility – and can have unintended spillover effects.

  • 02/08/11:
    EDHEC Risk Institute–Asia awarded maximum registration period in Singapore
    The Singapore Council for Private Education (CPE) awarded a six-year registration period to EDHEC Risk Institute—Asia. This is the longest registration period that the country’s private education regulator can grant. Mr Olivier Oger, Dean of EDHEC Business School commented: “In 2010, Singapore’s Economic Development Board invited EDHEC-Risk Institute to join its Global Schoolhouse initiative and contribute to build-up the Singapore Education brand-name in finance. The award of a registration by the CPE for the longest duration provided by its rules demonstrates a high degree of compliance with the quality assurance requirements the regulator has set forth for academic institutions operating in and from Singapore.”

  • 26/07/11:
    New EDHEC-Risk Position Paper Confirms No Consensus Exists on Link between Speculation and Price Volatility
    In a new EDHEC-Risk Institute position paper, “A Review of the G20 Meeting on Agriculture: Addressing Price Volatility in the Food Markets,” Hilary Till, Research Associate with EDHEC-Risk Institute, and Principal of Premia Capital Management, examines food price volatility in the context of the G20 meeting of agriculture ministers. In reviewing the evidence so far regarding the impact of commodity trading, speculation, and index investment on price volatility, the report finds that the evidence for the prosecution does not seem particularly compelling at this point. The paper’s conclusion is to agree with the World Bank president who has said that the answer to food price volatility is not to prosecute or block markets, but to use them better. In the author’s view, one sensible use of financial engineering is for hedging volatile food price risk with appropriate commodity derivatives contracts.

  • 21/07/11:
    EDHEC-Risk Institute proposes an integrated approach to sovereign wealth risk management
    This new publication, “An Integrated Approach to Sovereign Wealth Risk Management,” contains the results of the second-year research work conducted at EDHEC-Risk Institute within the Deutsche Bank research chair on asset-liability management (ALM) techniques for sovereign wealth fund (SWF) management. The publication extends earlier work on the optimal investment policy and risk management practices of sovereign wealth funds by integrating these funds into the economic balance sheets of their sponsoring countries. This echoes recent advances in corporate pension fund management that consider the fund an integral part of the corporate balance sheet and jointly analyse capital structure and pension fund allocation choices. The research shows how to derive the optimal asset allocation for sovereign assets given different drivers of economic risks as well as varying degrees of indebtedness.

  • 13/07/11:
    EDHEC-Risk Institute Warns the European Commission of the Inadvisability of Imposing a Tobin Tax
    In an open letter dated July 12, 2011 addressed to the European Internal Market and Services Commissioner, Michel Barnier, EDHEC-Risk Institute has warned of the inadvisability of imposing a “Tobin tax” on financial transactions in order to fund the future European budget. On the basis of a position paper by Raman Uppal, Professor of Finance at EDHEC Business School, EDHEC-Risk Institute’s recommendations are structured around the theoretical evidence on transaction taxes, the empirical evidence on transaction taxes, and implementation challenges.

  • 27/06/11:
    Professor Frank J. Fabozzi joins EDHEC-Risk Institute
    EDHEC-Risk Institute is delighted to announce that Professor Frank J. Fabozzi, one of the most respected figures in the academic community in finance worldwide and author and editor of over 100 reference textbooks in finance, will be joining EDHEC-Risk Institute on August 1, 2011. Professor Fabozzi will be joining EDHEC-Risk Institute as part of its North American strategy and will be working on the development of EDHEC-Risk Institute North America with Professor Lionel Martellini, Scientific Director of EDHEC-Risk Institute, who will be in charge of North American development for the Institute from the beginning of the 2011/2012 academic year. Professor Fabozzi will also supervise dissertations of candidates to the EDHEC-Risk Institute PhD in Finance, a programme opened to finance practitioners.

  • 21/06/11:
    New EDHEC-Risk Institute research highlights the dangers of accounting and sponsor risk for corporate pension plans
    A new study entitled “The Elephant in the Room: Accounting and Sponsor Risks in Corporate Pension Plans,” drawn from the AXA Investment Managers “Regulation and Institutional Investment” research chair at EDHEC-Risk Institute, surveys how pension funds and sponsors manage the main risks they face and how institutional constraints—accounting and prudential regulations, the organisation of the relationship between the pension fund and its sponsor, and social laws—influence the investment strategy of sponsors and pension funds. The survey elicited 100 responses. The assets under management (AUM) of the pension funds with which the respondents are associated amount to more than €730 billion. Sponsoring companies have a total balance sheet size of more than €5.5 trillion.

  • 11/05/11:
    New EDHEC-Risk Institute research affirms that issuing inflation-linked bonds substantially increases firm value
    In a climate of increasing inflation uncertainty, EDHEC-Risk Institute has released a new study analysing optimal corporate debt management policies. The study, produced as part of the research chair on “The Case for Inflation-Linked Corporate Bonds: Issuers’ and Investors’ Perspectives,” in partnership with Rothschild & Cie, entitled “Optimal Design of Corporate Market Debt Programmes in the Presence of Interest-Rate and Inflation Risks,” examines the optimal liability structure when the issuer faces such instruments as fixed-rate debt, floating-rate debt, and inflation-linked debt. The authors of the study, Lionel Martellini, Scientific Director, and Vincent Milhau, Senior Research Engineer, EDHEC-Risk Institute, introduce a general framework with which a corporation subject to default risk may make optimal debt-management decisions.

  • 20/04/11:
    EDHEC-Risk Institute to design a series of Solvency II benchmarks in cooperation with Russell Investments
    EDHEC-Risk Institute has announced that it will conduct research in cooperation with Russell Investments in order to design new benchmarks for European insurance companies that are representative of a dynamic allocation strategy between bonds and equities. The aim of the initiative is to enable all small- or medium-sized European insurance companies which do not have a full internal risk mitigation model to be able to avail of an objective academic reference in order to manage the risk of their equity investments. The benchmarks, based on dynamic core-satellite and life-cycle investing techniques, will allow investors to respect a maximum drawdown or maximum loss limit for specific horizons.

  • 12/04/11:
    EDHEC finance professor Raman Uppal among the beneficiaries awarded research grants by the Foundation Banque de France
    Each year the Foundation Banque de France for Economic Research invites research proposals for funding. EDHEC-Risk Institute is pleased to announce that the board of the foundation at its meeting of March 9, 2011, taking into account the assessment of the evaluation committee, awarded funding from its 15th call for proposals to a project entitled “Comparing Different Regulatory Measures to Control Stock Market Volatility: A General Equilibrium Analysis”. Professor Raman Uppal of EDHEC Business School is one of the co-recipients of this funding along with co-researchers Bernard Dumas (INSEAD), Adrian Buss and Grigory Vilkov (both Goethe University Frankfurt). The project will compare the effects of different regulatory measures that a central bank can use to reduce stock market volatility and ensure orderly financial markets.

  • 07/04/11:
    EDHEC Risk Institute—Europe launches with London opening
    EDHEC-Risk Institute, the premier European centre for financial research and its application to the industry, hosted an exclusive reception last night at its newly-opened London premises to mark the launch of EDHEC Risk Institute–Europe. The event, attended by chief executive officers and senior representatives of financial institutions, was opened by Olivier Oger, Dean of EDHEC Business School and Professor Noël Amenc, Director of EDHEC-Risk Institute and underlined the relevance of research conducted by EDHEC-Risk Institute for financial institutions and end-investors. With the support of the financial Industry, EDHEC Risk Institute–Europe aims to continue to be the leading academic institution fostering innovation and high professional standards in the investment industry. The opening of the London office follows the launch of EDHEC Risk Institute–Asia in Singapore in January of this year.

  • 22/03/11:
    Enterprise Risk Management and Corporate Governance for Insurance Firms - 17th May 2011
    The International Centre for Financial Regulation (ICFR) and EDHEC Business School are jointly holding a conference, "Enterprise Risk Management and Corporate Governance for Insurance Firms" on 17 May 2011 at the brand new EDHEC Business School campus in Lille, France. The conference will provide a forum for discussing the latest research into the current issues and practices of "Enterprise Wide Risk Management and Corporate Governance for Insurance Firms", whilst focusing on the implications of changing solvency, capital adequacy and accountability requirements, and their interrelationships between various regulatory, shareholder and management perspectives on the effective management of these organisations.

  • 22/03/11:
    EDHEC-Risk to organise the sixth edition of the EDHEC-Risk Alternative Investment Days in London on April 5-6 next
    EDHEC-Risk Institute will be staging the sixth edition of its EDHEC-Risk Alternative Investment Days conference at The Tower Hotel in London on April 5-6 next. The conference addresses the allocation to alternative investments by institutional investors and presents state-of the-art approaches for optimal use of alternative investments and hedge funds in portfolio construction. Researchers will also examine various alternative asset classes including Private Equity and Commodities and bring new insights to risk diversification and inflation hedging.

  • 17/03/11:
    EDHEC-Risk Institute announces the launch of EDHEC-Risk Indices & Benchmarks
    EDHEC-Risk Institute has announced the creation of a spin-off, EDHEC-Risk Indices & Benchmarks, which aims to be one of the leading beta designers for the investment industry. EDHEC-Risk Indices & Benchmarks will be based in London, New York, Nice and Singapore and has recruited two experienced executives to spearhead business development in Europe and North America. The creation of EDHEC-Risk Indices & Benchmarks is part of an evolution in the asset management industry whereby passive investment is becoming increasingly important. In such a context, the selection of the right benchmarks will totally condition the risk-adjusted return of investors’ core allocation. For EDHEC-Risk Indices & Benchmarks, being an informed passive investor thus assumes being attentive to the choice of benchmark.

  • 08/03/11:
    EDHEC-Risk Institute Warns the European Parliament of the Dangers of Banning Naked Sales of Credit Default Swaps
    In an open letter of March 8, 2011 addressed to the Chair of the Economic and Monetary Affairs Committee of the European Parliament, Sharon Bowles, and Pascal Canfin, the Committee’s Rapporteur on the draft EU regulation on short selling and credit default swaps, EDHEC-Risk Institute has warned of the dangers of prohibiting “naked” sales of sovereign credit default swaps. Besides the fact that the lack of convergence on these issues with the US authorities leaves little hope of the measures being effective, EDHEC-Risk Institute thinks that this ban would pose numerous problems and run up against legal and practical obstacles that would make it inapplicable or even counterproductive.

  • 03/03/11:
    EDHEC-Risk Institute receives Eurex support for new research on volatility derivatives
    EDHEC-Risk Institute (London, Nice, Singapore) has announced it will be conducting new research exploring the uses of volatility derivatives in equity portfolio management with the support of leading derivatives exchange Eurex. The research project’s emphasis will be on optimising access to the equity risk premium while controlling for downside risk and will be co-managed by Stoyan Stoyanov, head of research at EDHEC Risk Institute–Asia and Lionel Martellini, scientific director of EDHEC-Risk Institute.

  • 17/02/11:
    New EDHEC-Risk Institute research examines dynamic hedging of an option when the underlying asset is not available for trading
    A new research paper, “Option Pricing and Hedging in the Presence of Cross-Hedge Risk,” drawn from the “Structured Products and Derivative Instruments” research chair at EDHEC-Risk Institute supported by the French Banking Federation (FBF), addresses dynamic hedging of an option when the underlying asset is not available for trading, and some other asset, or portfolio, is used as a substitute. The underlying asset may be unavailable because of liquidity constraints, legal constraints, high market friction, or for other reasons. If the substitute asset were perfectly correlated with the actual underlying asset, no further risk would be introduced, since one could offset any gain or loss in the option position by dynamically trading the substitute asset. In general, however, correlation is not perfect, and the unavailability of the underlying asset induces some form of dynamic incompleteness in that perfect replication is no longer possible with a self-financing strategy.

  • 03/02/11:
    Ekkehart Boehmer, Raman Uppal and Giuseppe Bertola join EDHEC-Risk Institute
    We very pleased to announce that Ekkehart Boehmer, Raman Uppal and Giuseppe Bertola have become members of EDHEC-Risk Institute. They will all be core-faculty professors in the EDHEC-Risk Institute PhD in Finance programme. Professor Boehmer is a specialist in equity market micro-structure and the economics of trading. Professor Uppal specialises in portfolio selection, asset pricing, risk management, and exchange rates. Giuseppe Bertola's research focuses on labour and financial market structures and institutions in an international comparative perspective.

  • 24/01/11:
    EDHEC-Risk Institute makes Asian debut in Singapore
    EDHEC-Risk Institute marked the opening of its Asian offices at a ceremony in Singapore on Friday which was attended by chief executive officers and senior representatives of financial institutions, and by regulators and diplomats. The event was opened by Mr Heng Swee Keat, Managing Director of the Monetary Authority of Singapore, the country’s central bank and financial regulatory authority, who used the occasion of his keynote address to warn against the risk of property bubbles in Asia and announce new risk management governance requirements for banks and insurers.

  • 24/01/11:
    EDHEC-Risk Institute calls for greater attention to non-financial risks in the European fund management industry
    A new study conducted by EDHEC-Risk Institute as part of the “Risk and Regulation in the European Fund Management Industry” research chair in partnership with CACEIS, entitled “The European Fund Management Industry Needs a Better Grasp of Non-Financial Risks,” looks at how non-financial risks and failures have impacted the regulatory agenda in Europe and traces the management of liquidity, counterparty, compliance, misinformation, and other non-financial risks in the fund industry. By identifying the distribution of risks and responsibilities in the industry, the authors, Noël Amenc, Director, EDHEC-Risk Institute, and Samuel Sender, Applied Research Manager, EDHEC-Risk Institute, examine how convergence between country regulations could be achieved. They also assess how fund unit-holders can best be protected with appropriate regulations, improved risk management practices, and greater transparency.

  • 17/01/11:
    Ground-breaking research shows that large private equity firms underperform small firms
    Newly-released research by Florencio Lopez-de-Silanes of EDHEC Business School with co-authors Ludovic Phalippou and Oliver Gottschalg, entitled “Giants at the Gate: On the Cross-Section of Private Equity Investment Returns,” examines the determinants of private equity (PE) returns using a newly constructed database of 7,500 investments worldwide over forty years. The dataset is, to the best of the authors’ knowledge, the largest panel of worldwide PE (buyout) investment performance. Among the many key and previously undocumented findings of the study:
    • The scale of private equity firms is a significant and consistent driver of returns.
    Diseconomies of scale are linked to firm structure: independent firms, less hierarchical firms, and those with managers of similar professional backgrounds exhibit smaller diseconomies of scale. More globally, small investments outperform large ones.

  • 10/01/11:
    New EDHEC-Risk Institute research provides a suggestion for remedying the overstated performance of non-investable hedge fund indices
    The biases that inflate the performance of hedge funds have been well documented in the financial literature. Survivorship bias, which results from the ex-post exclusion of unsuccessful funds from databases, and backfill or instant history bias, which occurs when the historical performance of a successful fund is retroactively added (backfilled) into the database, distort the performance of the hedge fund industry. These biases tend to inflate the returns posted by non-investable hedge fund indices. Investable hedge fund indices can help investors mitigate the effects of these biases, but investable indices cannot include all existing funds. The number of underlying funds is often twenty times less than that of non-investable indices. In these conditions, investable indices are naturally less representative than non-investable indices. Consequently, it is hardly surprising that investable indices tend to underperform their non-investable versions. In a new study entitled “A Suggestion for Remedying the Overstated Performance of Non-Investable Hedge Fund Indices,” EDHEC-Risk Institute examines whether the liquidity crisis that followed the Lehman collapse and significantly impacted the performance of hedge fund strategies (especially the strategies exposed to credit risk) has increased this excess return or not.