EDHEC-Risk Newsletter
December 16, 2017 Asset Management Research
 
 
Events
 
Books


EDITORIAL

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

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. 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...

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. More...

Need for discrimination in selecting a smart beta product Smart beta products are catching on fast with investors, justifiably so as it is a powerful tool in their armoury of techniques for risk management and control. The strong appeal of this concept lies in what it stands for, index replication. The flaws of the traditional cap-weighted indices are well-documented and smart beta products are meant to provide superior alternatives. More...


FEATURES

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. More...


INTERVIEW

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...


EDHEC PUBLICATIONS

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...

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...

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...


EDHEC-RISK NEWS

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. More...

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...

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...

Frédéric Blanc-Brude presents the results of EDHEC-Risk Institute's infrastructure research at the International Cente for Pension Management in Toronto On June 10, 2015, Frédéric Blanc-Brude, Research Director at EDHEC Risk Institute—Asia, presented the results of three years of academic research on asset pricing and risk measurement in privately held infrastructure investments at the International Centre for Pension Management Discussion Forum on the theme of "Long-Horizon Investing" held in Toronto. More...