THE LOW-VOLATILITY ANOMALY: Does It Work In Practice?
|
|
- Alannah Nash
- 8 years ago
- Views:
Transcription
1 THE LOW-VOLATILITY ANOMALY: Does It Work In Practice? Glenn Tanner McCoy College of Business, Texas State University, San Marcos TX ABSTRACT This paper serves as both an empirical test of the low-volatility anomaly and an examination of the benefits of the anomaly in a portfolio sense. Since the introduction of the Standard & Poor s Low Volatility exchangetraded fund in 2011, individual investors have been easily able to buy into this anomaly. We find that since the fund s inception, the fund has delivered superior risk-adjusted returns relative to other common exchangetraded index funds. However, we find that the low-volatility fund s impact is negligible when added to a portfolio of popular, diversified index funds. Keywords: Volatility, Risk, Stock Returns, Portfolios JEL Codes: G11, G17 1. INTRODUCTION Though the low-volatility anomaly has received increased mainstream attention recently, it is not a new phenomenon. More than 40 years ago, Haugen (1975) first documented that low-volatility portfolios consistently produced higher risk-adjusted returns than high-volatility portfolios. While many academic studies confirmed and advanced Haugen s work (see for example, Baker (2011 and 2012)), we suggest that the anomaly did not fully become recognized by the finance industry until 2011, when Standard and Poor s introduced a family of low volatility stock indexes. Shortly after the index introduction, two exchange traded funds that tracked the S&P 500 Low Volatility Index were introduced, allowing investors to easily invest in the lowvolatility anomaly. We examine the performance of the largest of these funds, both on its own and in a typical diversified portfolio context for an individual investor. We find that the anomaly continues to thrive, as the fund has produced exceptional risk-adjusted returns compared to other common index funds. However, we find that as an addition to a well-diversified portfolio, the low-volatility fund has a miniscule impact on the risk-return efficiency of the portfolio. Using linear programming techniques to construct ex post minimum risk portfolios, we show that in spite of its excellent individual risk-return profile, the Low Volatility Index exchange traded fund only marginally moves the ex post efficient frontier of several common assets. 2. THE LOW VOLATILITY INDEX Standard and Poor s introduced the S&P 500 Low Volatility Index on April 4, The index contains the 100 least volatile stocks in the S&P 500 based on the daily return standard deviation over the prior 252 trading days. The index is rebalanced quarterly, with each stock s weighting set inversely proportional to its volatility. Standard and Poor s back-tested the index to 1991 and found that the strategy not only produced better riskadjusted returns than the S&P 500, but also dominated the index by generating higher average annual returns and lower standard deviations. These figures are reproduced in Table 1. Though one could easily argue that these back-tested results are inflated by selection bias, these numbers were likely extremely appealing to investors. On May 5, 2011, investors were afforded the opportunity to take a position in this index, as PowerShares debuted an exchange-traded fund (ETF) designed to mimic the index. The PowerShares S&P 500 Low Volatility Portfolio is listed on the New York Stock Exchange Arca and trades with the ticker symbol. Since its inception, the fund has experienced a 17% annual turnover rate and carries an expense ratio of 0.25%. As of December 2013, the fund s largest sector holdings were in Utilities (25%), Consumer Staples (20%), and 10
2 Industrials (17%). The fund had assets of $4.28 billion and experienced average daily volume of nearly 1.3 million shares over the previous three months. 3. DATA We first examined how individual investors can benefit from ownership of by comparing the fund with other typical index investments. We obtained weekly return data beginning on s inception date through year-end 2013 for and seven more exchange traded index funds covering broad asset classes: Corporate Bonds -- U.S. Credit Bond Index, which covers investment grade US corporate debt and dollardenominated foreign debt Treasury Bonds -- Barclays Year Treasury Bond Index Developed International -- MSCI EAFE Index, an international equity index representing developed markets outside of North America Global Stocks -- S&P Global 100, one hundred multinational blue chip companies Emerging Markets -- FTSE Emerging Index, over 800 large and midcap companies in 22 emerging markets Large Stocks (Domestic) Standard & Poor s 500 Small Stocks (Domestic) -- CRSP US Small Cap Index, a broadly diversified index of over 1700 small US companies We annualized the weekly returns and standard deviations and estimated the beta of each asset class relative to the S&P 500. We also calculated the Sharpe ratios, a measure of return to total risk taken, for the sample period. The Sharpe Ratio is the return on the asset less the risk-free interest rate, divided by the standard deviation of the asset returns. The results are presented in Table 2. It is rare for a financial anomaly to survive into commercialization, but the low volatility anomaly succeeded the fund posted the highest Sharpe Ratio of all the assets by a fairly large amount, supporting Haugen s 40-year-old results. Modern investment theory, however, suggests that it is unwise to consider assets in isolation; rather, an asset should be evaluated on its impact in a diversified portfolio of other assets. This impact is highly influenced by the correlation of the assets. Table 3 presents the correlation table for these eight assets. The table shows that has an extremely high correlation to both Large and Small Domestic stocks, and thus has similar correlations to the other five assets. 4. PORTFOLIO OPTIMIZATION To examine the impact of on portfolio returns, we took the returns on these assets since the introduction of and simple linear programming to determine optimal ex post portfolios at various levels of return, similar to Clarke (2006). First, we constructed the feasible set of portfolios using the seven traditional assets without ; the upward-sloping portion of the line represents the ex post efficient frontier of the included assets the portfolios that provided minimum risk for a given level of return. The potential attractiveness of can already be seen in Figure 1, as the fund plotted above the efficient frontier constructed from the seven other index funds. This means that not only did produce better riskadjusted returns than any of the other investments, but it also produced a more favorable risk-return profile than any portfolio that could be constructed out of the other seven assets. To quantify the benefits of, we recalculated the efficient frontier with included, which is presented in Figure 2. For almost all levels of return, the new efficient frontier lies above the old, meaning that created lower risk portfolios for each level of return. Examining the portfolio weights for portfolios on the efficient frontier showed that would have been a significant contributor to the minimum risk portfolio for all but the lowest return portfolios. Table 4 presents s weighting in each optimal portfolio, as well as the reduction in standard deviation from the portfolio achieved by adding. The results for the nine and ten percent return portfolios are particularly impressive made up the overwhelming majority of the minimum risk portfolios, while reducing the standard deviation of both portfolios by about 25%. 5. IMPACT OF SHORT-SELLING AND LEVERAGE The efficient frontier can be extended with short-selling and buying on margin. However, these two strategies have not always been available or practical for individual investors. In fact, Asness (2012) hypothesizes that the low volatility anomaly is caused by investors who demand high returns, but are leverage-constrained and thus overbid for high risk stocks. However in 2006, Proshares introduced a family of geared exchange traded funds that made both shorting and leveraging easy to accomplish. The Short S&P500 ETF (ticker = SH) seeks to deliver a daily return that is the inverse of the S&P 500. With a historical correlation to the S&P 500 of - 11
3 0.996 and a beta of -1.00, SH effectively allows individual investors to easily short the market. The Ultra S&P500 ETF (SSO) seeks daily returns that are double that of the S&P 500 and the UltraPro S&P500 ETF (UPRO) attempts to deliver daily returns triple the S&P 500 return. With correlations to the index of and above and betas of 2.01 and 3.02, these two funds effectively allow individual investors to leverage the market. We add these funds risk and return measures to our investment universe and again use linear programming to calculate the new efficient frontier with all assets except. Figure 3 shows how the addition of these geared ETFs alters our efficient frontier. The results are dramatic, as the geared ETFs produced significant riskreturn benefits at nearly all risk levels. Table 5 documents how much improvement the geared funds made relative to -included portfolios in Table 4, and presents the portfolio weightings of the geared funds in various minimum risk portfolios. Interestingly, all minimum risk portfolios included some positive weighting of the high-risk leverage portfolios in the optimal solution. Further, the risk reduction achieved from the geared portfolios was particularly substantial at both the lowest and highest levels of portfolio return. Finally, we determine the overall value of in a full portfolio context by constructing an efficient frontier with all of the assets available, including the geared ETFs. We do not present the graph because the two efficient frontiers, with and without, are visually indistinguishable. Table 6 summarizes that had a very minimal impact on the risk/risk return profile of optimal portfolios. s weightings in the minimum risk portfolios peak at about 11% and the risk reduction the fund provided was miniscule. These results indicate that while s risk-adjusted returns have proven to be exceptional since its introduction, did very little as an addition to broad portfolio. In other words, the low-volatility anomaly continued to persist, yet was not very useful in a portfolio context with geared ETFs. 6. THE CASE FOR GEARED ETFs We find one additional surprising result that is relevant for individual investors seeking to maximize their riskadjusted portfolio returns. Table 7 presents the non-zero portfolio weights for the minimum risk portfolios for each level of return. Interestingly, the optimal weighting for the S&P 500 (and the Small Cap Index) was 0% for all portfolio returns. For all portfolios, optimal risk/return balance was achieved primarily using Treasury Bonds and combinations of the geared S&P 500 ETFs. Optimal low-risk portfolios used low amounts of Treasuries and a combination of the Ultra S&P500 and the Short S&P500 ETFs. Optimal high-risk portfolios were achieved by higher weightings in Treasuries, but increasing leverage in the S&P 500 using the Ultras and the UltraPros. Table 8 documents the size and activity of these ETFs relative to. Not only are the geared portfolios much smaller in size than even, but their high trading volume relative to size suggests that more investors may simply be holding them short-term, attempting to time the market. Regardless, it seems likely that many individual investors are not capitalizing on a simple way to improve the risk-return characteristics of their portfolios. 7. CONCLUSION The PowerShares S&P500 Low Volatility Portfolio exchange traded fund () has been a successful attempt to capitalize on the low-volatility anomaly. Consistent with prior research, has produced superior risk-adjusted returns since its introduction in May However, we also find that the fund s usefulness is minimal in a portfolio context with other index funds and ETFs, particularly with geared S&P 500 ETFs which simulate short-selling and buying on margin. We document that these geared funds are likely underused by individual investors seeking to maximize the risk-return relationship in their overall portfolios. REFERENCES Asness, C., Frazzini, A., & Pedersen, L.H. (2012). Leverage Aversion and Risk Parity. Financial Analysts Journal, 68(1), Baker, M., Bradley B., & Wurgler J. (2011). Benchmarks as Limits to Arbitrage: Understanding the Low- Volatility Anomaly. Financial Analyst Journal, 67(1), Baker, N. L., & Haugen, R. (2012). Low Risk Stocks Outperform within All Observable Markets of the World. SSRN Working Paper, no Clarke, R., de Silva, H. & Thorley, S. (2006). Minimum-variance portfolios in the US equity market. Journal of Portfolio Management, 33(1), Haugen, R., & Heins, A. J. (1975). Risk and the Rate of Return on Financial Assets: Some Old Wine in New Bottles. Journal of Financial and Quantitative Analysis, 10(5),
4 Table 1: Risk and Return, Annual Return S&P % 15.16% S&P 500 Low-Volatility 10.19% 11.16% Table 2: Risk/Return Characteristics, Index Return Beta Sharpe Ratio Treasury Bonds 3.82% 9.82% Corporate Bonds 0.28% 4.88% International 6.12% 15.84% Global % 18.22% Emerging -7.86% 20.75% Large Stocks 9.88% 16.54% Small Stocks 11.53% 21.53% % 11.56% Table 3: Correlation Matrix Tbond Corp EAFE Global Emergin g Large Small Tbond 1.00 Corp International Global Emerging Large Small Portfolio Return Table 4: Impact of -- Minimum Risk Portfolios out Risk Reduction from Weight of 5.00% 4.50% 4.50% 0% 0% 6.00% 4.72% 4.72% 0% 2% 7.00% 6.35% 5.51% 0.84% 38% 8.00% 9.25% 7.15% 2.10% 65% 9.00% 12.53% 9.42% 3.11% 84% 10.00% 15.97% 12.24% 3.73% 89% 11.00% 19.49% 17.82% 2.67% 31% 13
5 Portfolio Return Table 5: Impact of Geared ETFs -- Minimum Risk Portfolios Shorts and Ultras (no ) Risk Reduction from Shorts and Ultras Weight of Shorts, Ultras 2.00% 4.28% 2.23% 2.05% 41%, 24% 3.00% 4.28% 2.81% 1.47% 34%, 26% 4.00% 4.36% 3.41% 0.95% 26%, 25% 5.00% 4.50% 4.02% 0.42% 19%, 23% 6.00% 4.72% 4.63% 0.09% 12%, 22% 7.00% 5.51% 5.24% 0.27% 5%, 21% 8.00% 7.15% 5.86% 1.31% 0%, 19%* 9.00% 9.42% 6.63% 2.79% 0%, 17%* 10.00% 12.24% 7.76% 4.48% 0%, 20%* 11.00% 17.82% 9.14% 8.68% 0%, 24%* * = weighting of UltraPro Portfolio Return Table 6: All Assets -- Minimum Risk Portfolios Shorts and Ultras Shorts, Ultras, and Risk Reduction from Weight of 2.00% 2.23% 2.21% 0.02% 5% 3.00% 2.81% 2.79% 0.02% 6% 4.00% 3.41% 3.39% 0.02% 8% 5.00% 4.02% 3.99% 0.03% 9% 6.00% 4.63% 4.60% 0.03% 10% 7.00% 5.24% 5.21% 0.03% 11% 8.00% 5.86% 5.85% 0.01% 9% 9.00% 6.63% 6.63% 0.00% 0% 10.00% 7.76% 7.76% 0.00% 0% 11.00% 9.14% 9.14% 0.00% 0% Table 7: Minimum Risk Portfolios Weights Portfolio Return Tbond EAFE Ultra UPro Short 2.00% 5% 24% 5% 26% 0% 40% 3.00% 6% 31% 6% 24% 0% 33% 4.00% 8% 37% 8% 22% 0% 26% 5.00% 9% 44% 9% 20% 0% 18% 6.00% 10% 51% 10% 18% 0% 11% 7.00% 11% 57% 12% 16% 0% 4% 8.00% 9% 65% 13% 5% 8% 0% 9.00% 0% 71% 12% 0% 17% 0% 10.00% 0% 70% 10% 0% 20% 0% 11.00% 0% 69% 7% 0% 24% 0% 14
6 Return Return Economics and Finance Review Vol. 3(08) pp , June, 2014 ISSN: Table 8: ETF Activity Fund Low Volatility SH Short SSO Ultra UPRO UltraPro Net Assets $4.28B $2.03B $1.39B $437M Avg Daily Volume $28.52M $88.17M $592.06M $190.16M Turnover days 23.0 days 2.3 days 2.3 days Figure 1 Feasible Set without S&P500 Small Stocks TBond Int'l Global Corp Bond Emerging Figure 2 Feasible Set with S&P500 Small Stocks TBond EAFE Global Corp Bond Emerging
7 Return Economics and Finance Review Vol. 3(08) pp , June, 2014 ISSN: Figure 3 Efficient Set with Shorts, Ultras S&P500 Small Stocks 5.00 TBond EAFE Global 0.00 Corp Bond Emerging
Benchmarking Low-Volatility Strategies
Benchmarking Low-Volatility Strategies David Blitz* Head Quantitative Equity Research Robeco Asset Management Pim van Vliet, PhD** Portfolio Manager Quantitative Equity Robeco Asset Management forthcoming
More informationLow Volatility Investing: A Consultant s Perspective
Daniel R. Dynan, CFA, CAIA ddynan@meketagroup.com M E K E T A I N V E S T M E N T G R O U P 100 LOWDER BROOK DRIVE SUITE 1100 WESTWOOD MA 02090 781 471 3500 fax 781 471 3411 www.meketagroup.com M:\MARKETING\Conferences
More informationDiversified Alternatives Index
The Morningstar October 2014 SM Diversified Alternatives Index For Financial Professional Use Only 1 5 Learn More indexes@morningstar.com +1 12 84-75 Contents Executive Summary The Morningstar Diversified
More informationRussell Low Volatility Indexes: Helping moderate life s ups and downs
Russell Indexes Russell Low Volatility Indexes: Helping moderate life s ups and downs By: David Koenig, CFA, FRM, Investment Strategist February 2013 Key benefits: Potential downside protection and upside
More informationWhitepaper for institutional investors. How Smart is Smart Beta Investing?
Whitepaper for institutional investors How Smart is Smart Beta Investing? December 2012 2 David Blitz, PhD, Head of Robeco Quantitative Equity Research How Smart is Smart Beta Investing? Recently introduced
More informationEmini Education - Managing Volatility in Equity Portfolios
PH&N Trustee Education Seminar 2012 Managing Volatility in Equity Portfolios Why Equities? Equities Offer: Participation in global economic growth Superior historical long-term returns compared to other
More informationwww.fa-mag.com www.pw-mag.com PRESENTED BY 1
www.fa-mag.com www.pw-mag.com 1 Confronting Market Volatility: Help Clients Weather The Market's Ups And Downs Mark E. Carver, CIMA March 25, 2015 How is BlackRock defining Smart Beta? An evolution in
More informationETF Total Cost Analysis in Action
Morningstar ETF Research ETF Total Cost Analysis in Action Authors: Paul Justice, CFA, Director of ETF Research, North America Michael Rawson, CFA, ETF Analyst 2 ETF Total Cost Analysis in Action Exchange
More information15.433 Investments. Assignment 1: Securities, Markets & Capital Market Theory. Each question is worth 0.2 points, the max points is 3 points
Assignment 1: Securities, Markets & Capital Market Theory Each question is worth 0.2 points, the max points is 3 points 1. The interest rate charged by banks with excess reserves at a Federal Reserve Bank
More informationishares MINIMUM VOLATILITY SUITE SEEKING TO WEATHER THE MARKET S UP AND DOWNS
ishares MINIMUM VOLATILITY SUITE SEEKING TO WEATHER THE MARKET S UP AND DOWNS Table of Contents 1 Introducing the ishares Minimum Volatility Suite... 02 2 Why Consider the ishares Minimum Volatility Suite?...
More informationTHE LOW-VOLATILITY EFFECT: A COMPREHENSIVE LOOK
THE LOW-VOLATILITY EFFECT: A COMPREHENSIVE LOOK AUGUST 2012 CONTRIBUTORS Aye M. Soe, CFA Director Index Research & Design aye.soe@spdji.com 1: INTRODUCTION Among the long-standing anomalies in modern investment
More informationPurer return and reduced volatility: Hedging currency risk in international-equity portfolios
Purer return and reduced volatility: Hedging currency risk in international-equity portfolios Currency-hedged exchange-traded funds (ETFs) may offer investors a compelling way to more precisely access
More informationThe Master Statement of Investment Policies and Objectives of The Lower Colorado River Authority Retirement Plan and Trust. Amended June 16, 2015
The Master Statement of Investment Policies and Objectives of The Lower Colorado River Authority Retirement Plan and Trust Amended June 16, 2015 Introduction The Lower Colorado River Authority ( LCRA )
More informationRethinking Fixed Income
Rethinking Fixed Income Challenging Conventional Wisdom May 2013 Risk. Reinsurance. Human Resources. Rethinking Fixed Income: Challenging Conventional Wisdom With US Treasury interest rates at, or near,
More informationUniversity of Saskatchewan Academic Money Purchase Pension Plan
University of Saskatchewan Academic Money Purchase Pension Plan Investment Review Annual General Meeting Presentation February 2015 Prepared by Agenda Plan Objectives & Guiding Risk Philosophy Investment
More informationDefensive equity. A defensive strategy to Canadian equity investing
Defensive equity A defensive strategy to Canadian equity investing Adam Hornung, MBA, CFA, Institutional Investment Strategist EXECUTIVE SUMMARY: Over the last several years, academic studies have shown
More informationNavigator Fixed Income Total Return
CCM-15-12-1 As of 12/31/2015 Navigator Fixed Income Navigate Fixed Income with a Tactical Approach With yields hovering at historic lows, bond portfolios could decline if interest rates rise. But income
More informationGlossary of Investment Terms
online report consulting group Glossary of Investment Terms glossary of terms actively managed investment Relies on the expertise of a portfolio manager to choose the investment s holdings in an attempt
More informationA NEW WAY TO INVEST IN STOCKS
WHITE PAPER A NEW WAY TO INVEST IN STOCKS By Koen Van de Maele, CFA and Sébastien Jallet TABLE OF CONTENTS INTRODUCTION 2 STANDARD EQUITY INDICES 3 LOW-RISK INVESTING 4 QUALITY SCREENING 6 COMBINING LOW-RISK
More informationLOW VOLATILITY US EQUITY Deferred Purchase Agreements
FOR WHOLESALE INVESTORS ONLY LOW VOLATILITY US EQUITY Deferred Purchase Agreements Invest in US Equities and Protect your capital THE OPPORTUNITY Exposure to 100 large US and multinational companies via
More informationFREE MARKET U.S. EQUITY FUND FREE MARKET INTERNATIONAL EQUITY FUND FREE MARKET FIXED INCOME FUND of THE RBB FUND, INC. PROSPECTUS.
FREE MARKET U.S. EQUITY FUND FREE MARKET INTERNATIONAL EQUITY FUND FREE MARKET FIXED INCOME FUND of THE RBB FUND, INC. PROSPECTUS December 31, 2014 Investment Adviser: MATSON MONEY, INC. 5955 Deerfield
More informationExchange Traded Funds
LPL FINANCIAL RESEARCH Exchange Traded Funds February 16, 2012 What They Are, What Sets Them Apart, and What to Consider When Choosing Them Overview 1. What is an ETF? 2. What Sets Them Apart? 3. How Are
More informationVANGUARD TO CHANGE TARGET BENCHMARKS FOR 22 INDEX FUNDS
PRESS RELEASE For a full list of the impacted funds and more information, contact Vanguard Public Relations at 610-669- 5002. VANGUARD TO CHANGE TARGET BENCHMARKS FOR 22 INDEX FUNDS VALLEY FORGE, PA (October
More informationState Street Target Retirement Funds - Class K
The State Street Target Retirement Funds - Class K (the "Funds") represent units of ownership in the State Street Target Retirement Non-Lending Series Funds. The Funds seek to offer complete, low cost
More informationModernizing Portfolio Theory & The Liquid Endowment UMA
Modernizing Portfolio Theory & The Liquid Endowment UMA Michael Featherman, CFA Director of Portfolio Strategies November 2012 Modern Portfolio Theory Definition and Key Concept Modern Portfolio Theory
More information15.401 Finance Theory
Finance Theory MIT Sloan MBA Program Andrew W. Lo Harris & Harris Group Professor, MIT Sloan School Lecture 13 14 14: : Risk Analytics and Critical Concepts Motivation Measuring Risk and Reward Mean-Variance
More informationHIGH DIVIDENDS: MYTH VS. REALITY A STUDY OF DIVIDEND YIELDS, RISK AND RETURNS
HIGH DIVIDENDS: MYTH VS. REALITY A STUDY OF DIVIDEND YIELDS, RISK AND RETURNS EXECUTIVE SUMMARY This paper examines the relationship between dividend yields, risk and returns, through an exhaustive analysis
More informationMadison Investment Advisors LLC
Madison Investment Advisors LLC Intermediate Fixed Income SELECT ROSTER Firm Information: Location: Year Founded: Total Employees: Assets ($mil): Accounts: Key Personnel: Matt Hayner, CFA Vice President
More informationGIPS List of Composite Descriptions. Perkins Composites...11. Fixed Income Composites... 14. Global Macro Composites...19. Alternative Composites...
GIPS List of Composite Descriptions Updated 6/4/2015 Janus Equity Composites...2 Perkins Composites....11 Fixed Income Composites... 14 Global Macro Composites...19 Alternative Composites.....19 Allocation
More informationKeeping it Simple: White Paper. Lifestyle Funds: A Streamlined Approach
Keeping it Simple: Lifestyle Funds for Retirement Planning Retirement investors who suspect that things are more complicated than they used to be can take heart from the findings of a new study by American
More informationRYT Sector Weights. Price Chart
March 11, 2016 GUGGENHEIM SP 500 EQL WEIGHT TECHNOLOGY (RYT) $89.67 Risk: Med Zacks ETF Rank 2 - Buy 2 Fund Type Issuer Technology - broad RYDEXSGI RYT Sector Weights Benchmark Index SP EQUAL WEIGHT INDEX
More informationThe Dual Advantage of Long/Short Equity
July 2014 The Dual Advantage of Long/Short Equity Adding an allocation to this liquid alternative strategy can help investors boost their returns while lowering total portfolio risk. Author Charles Cook,
More informationWhen rates rise, do stocks fall?
PRACTICE NOTE When rates rise, do stocks fall? The performance of equities and other return-seeking assets in rising and falling interest rate scenarios, January 1970 through September 2013 William Madden,
More informationSPDR S&P 400 Mid Cap Value ETF
SPDR S&P 400 Mid Cap Value ETF Summary Prospectus-October 31, 2015 Before you invest in the SPDR S&P 400 Mid Cap Value ETF (the Fund ), you may want to review the Fund's prospectus and statement of additional
More informationBest Styles: Harvesting Risk Premium in Equity Investing
Strategy Best Styles: Harvesting Risk Premium in Equity Investing Harvesting risk premiums is a common investment strategy in fixed income or foreign exchange investing. In equity investing it is still
More informationThe Equity Premium in India
The Equity Premium in India Rajnish Mehra University of California, Santa Barbara and National Bureau of Economic Research January 06 Prepared for the Oxford Companion to Economics in India edited by Kaushik
More informationPorter, White & Company
Porter, White & Company Optimizing the Fixed Income Component of a Portfolio White Paper, September 2009, Number IM 17.2 In the White Paper, Comparison of Fixed Income Fund Performance, we show that a
More informationBlack Box Trend Following Lifting the Veil
AlphaQuest CTA Research Series #1 The goal of this research series is to demystify specific black box CTA trend following strategies and to analyze their characteristics both as a stand-alone product as
More informationThe recent volatility of high-yield bonds: Spreads widen though fundamentals stay strong
Investment Insights The recent volatility of high-yield bonds: Spreads widen though fundamentals stay strong Kevin Lorenz, CFA, Managing Director, Lead Portfolio Manager of TIAA-CREF's High-Yield Fund
More informationPrivate Wealth Management Mutual Fund Solution
Private Wealth Management Mutual Fund Solution A Step-by-Step Guide to Investment Success In Collaboration with Portfolio Resources Group, Inc. The Strategic Approach to Building Mutual Fund Portfolios
More informationEmerging Market Volatility
EGA Wealth Management Expert Series Emerging Market Volatility Remedies for the Chronically Underweight Wealth managers often contemplate aligning emerging market (EM) allocations with global market capitalization
More informationFactoring In Value and Momentum in the US Market
For Financial Professional Use Only Factoring In and in the US Market Morningstar Research Paper January 2014 Paul Kaplan, Ph.D., CFA Director of Research, Morningstar Canada +1 416 484-7824 paul.kaplan@morningstar.com
More informationTarget-Date Funds: The Search for Transparency
Target-Date Funds: The Search for Transparency Presented by: Joachim Wettermark, Treasurer Salesforce.com, inc. Linda Ruiz-Zaiko, President Financial, Inc. Qualified Default Investment Alternative (QDIA)
More informationCHAPTER 7: OPTIMAL RISKY PORTFOLIOS
CHAPTER 7: OPTIMAL RIKY PORTFOLIO PROLEM ET 1. (a) and (e).. (a) and (c). After real estate is added to the portfolio, there are four asset classes in the portfolio: stocks, bonds, cash and real estate.
More informationS&P 500 Low Volatility Index
S&P 500 Low Volatility Index Craig J. Lazzara, CFA S&P Indices December 2011 For Financial Professional/Not for Public Distribution There s nothing passive about how you invest. PROPRIETARY. Permission
More informationfi360 Asset Allocation Optimizer: Risk-Return Estimates*
fi360 Asset Allocation Optimizer: Risk-Return Estimates* Prepared for fi360 by: Richard Michaud, Robert Michaud, Daniel Balter New Frontier Advisors LLC Boston, MA 02110 February 2015 * 2015 New Frontier
More informationProspectus Socially Responsible Funds
Prospectus Socially Responsible Funds Calvert Social Investment Fund (CSIF) Balanced Portfolio Equity Portfolio Enhanced Equity Portfolio Bond Portfolio Money Market Portfolio Calvert Social Index Fund
More informationActive Versus Passive Low-Volatility Investing
Active Versus Passive Low-Volatility Investing Introduction ISSUE 3 October 013 Danny Meidan, Ph.D. (561) 775.1100 Low-volatility equity investing has gained quite a lot of interest and assets over the
More informationThe active/passive decision in global bond funds
The active/passive decision in global bond funds Vanguard research November 213 Executive summary. This paper extends the evaluation of active versus passive management to global bond funds. Previous Vanguard
More informationPublic Equity Portfolio Overview May 29, 2013
Public Equity Portfolio Overview May 29, 2013 Agenda Equity Markets Overview Portfolio Profile Portfolio Structure Activities/Accomplishments Global Equity Initiatives Hedged Equity Portfolio 2 General
More informationA Behavioral Economics Exploration into the Volatility Anomaly *
Policy Research Institute, Ministry of Finance, Japan, Public Policy Review, Vol.9, No.3, September 2013 457 A Behavioral Economics Exploration into the Volatility Anomaly * The NUCB Graduate School Equity
More information11.3% -1.5% Year-to-Date 1-Year 3-Year 5-Year Since WT Index Inception
WisdomTree ETFs WISDOMTREE HIGH DIVIDEND FUND DHS Nearly 10 years ago, WisdomTree launched its first dividend-focused strategies based on our extensive research regarding the importance of focusing on
More informationBehavioral Portfolio Management CFA Society of San Antonio Mamacita s San Antonio January 16, 2014
Behavioral Portfolio Management CFA Society of San Antonio Mamacita s San Antonio January 16, 2014 C. Thomas Howard, PhD Emeritus Professor of Finance Daniels College of Business CEO and Director of Research
More informationNavigator Fixed Income Total Return
CCM-15-08-1 As of 8/31/2015 Navigator Fixed Income Total Return Navigate Fixed Income with a Tactical Approach With yields hovering at historic lows, bond portfolios could decline if interest rates rise.
More informationEQUITIES. Making the most of the market s long-term potential
EQUITIES Making the most of the market s long-term potential Three things to know about the stock market 1 It s one of the best ways to build wealth More than any other investment, stocks represent the
More informationSELECT 40 LARGE-CAP STOCK LOW-VOLATILITY LOW-BETA INVESTMENT STRATEGY
Introduction Boston Harbor s mission is to preserve and grow our clients capital. We achieve our mission by creating investment strategies that meet the goals of preservation of capital, total return,
More informationBASKET A collection of securities. The underlying securities within an ETF are often collectively referred to as a basket
Glossary: The ETF Portfolio Challenge Glossary is designed to help familiarize our participants with concepts and terminology closely associated with Exchange- Traded Products. For more educational offerings,
More informationHedge Funds: A Preamble. Michael F. Percia
Hedge Funds: A Preamble Michael F. Percia 1 Hedge Funds: A Preamble Presentation Overview Hedge Funds 101 Discussion/Questions Definition Strategies Industry Size Relative Risk/Return 2 Hedge Funds: A
More informationA constant volatility framework for managing tail risk
A constant volatility framework for managing tail risk Alexandre Hocquard, Sunny Ng and Nicolas Papageorgiou 1 Brockhouse Cooper and HEC Montreal September 2010 1 Alexandre Hocquard is Portfolio Manager,
More information1. Fixed income/cash investments - FDIC insured account option, stable value fund, or money market mutual fund.
Wisconsin Deferred Compensation Program Deferred Compensation Board Investment Policy Statement Approved by the Deferred Compensation Board November 1998 Revised February 2005 Objective The Wisconsin Deferred
More informationMinimum Volatility Equity Indexes
Minimum Volatility Equity Indexes Potential Tools for the Insurance Company November 2013 Overview Insurers looking for greater risk-adjusted returns from their portfolios often consider minimum volatility
More informationMcKinley Capital U.S. Equity Income Prospects for Performance in a Changing Interest Rate Environment
March 25, 2014 McKinley Capital U.S. Equity Income Prospects for Performance in a Changing Interest Rate Environment This paper analyzes the historic performance of the McKinley Capital Management, LLC
More informationEvolution of GTAA Investment Styles. In This Issue: June 2012
June 2012 ALPHA GROUP TOPIC The Alpha Group researches investment managers. In This Issue: n Evolution of GTAA Investment Styles n Risk-Parity vs. GTAA Managers n Implementation n Investing in a GTAA Strategy
More informationASSET ALLOCATION TO ISRAEL: STRENGTHENING YOUR PORTFOLIO BY INCLUDING ISRAELI GLOBAL EQUITIES. May 2014
ASSET ALLOCATION TO ISRAEL: STRENGTHENING YOUR PORTFOLIO BY INCLUDING ISRAELI GLOBAL EQUITIES May 2014 FOREWORD BlueStar Global Investors develops investment solutions and research on Israeli and Middle
More informationLow-volatility investing: a long-term perspective
ROCK note January 2012 Low-volatility investing: a long-term perspective For professional investors only Pim van Vliet Senior Portfolio Manager, Low-Volatility Equities Introduction Over the long-run,
More information1 Year 3 Years 5 Years 10 Years
Summary Prospectus Gerstein Fisher Multi-Factor International Growth Equity Fund Trading Symbol: GFIGX March 30, 2015 Before you invest, you may want to review the Fund s prospectus, which contains more
More informationAlternative Investing
Alternative Investing An important piece of the puzzle Improve diversification Manage portfolio risk Target absolute returns Innovation is our capital. Make it yours. Manage Risk and Enhance Performance
More informationEMPIRICAL ANALYSES OF THE DOGS OF THE DOW STRATEGY: JAPANESE EVIDENCE. Received July 2012; revised February 2013
International Journal of Innovative Computing, Information and Control ICIC International c 2013 ISSN 1349-4198 Volume 9, Number 9, September 2013 pp. 3677 3684 EMPIRICAL ANALYSES OF THE DOGS OF THE DOW
More informationCounty of Orange - 98984-01/02 Investment Performance as of 04/29/2016
County of Orange - 98984-01/02 Investment Performance as of 04/29/2016 Current performance may be lower or higher than performance data shown. Performance data quoted represents past performance and is
More informationGlobal Low Volatility Anomaly
Insights on... Global Low Anomaly Global Low Anomaly: Benefiting from an Actively Designed Approach The low volatility anomaly suggests that low-volatility, low-beta securities outperform high-volatility
More informationUnderstanding Managed Futures
Understanding Managed Futures February 2009 Introduction Managed futures have proven their strengths as an investment since the first funds were launched in the early 1970s. For over more than 30 years,
More informationMarket Seasonality Historical Data, Trends & Market Timing
Market Seasonality Historical Data, Trends & Market Timing We are entering what has historically been the best season to be invested in the stock market. According to Ned Davis Research if an individual
More informationExchange-Traded Funds
Exchange-Traded Funds By Ken Hawkins Investopedia Introduction Exchange-traded funds (ETFs) can be a valuable component for any investor's portfolio, from the most sophisticated institutional money managers
More informationNAME: CLASS PERIOD: An Introduction to Stocks and Bonds
22.1 An Introduction to Stocks and Bonds There are many different ways to invest your money. Each of them has different levels of risk and potential return. Stocks and bonds are two common types of financial
More informationCurrency Category Handbook
Currency Category Handbook By: Terry Tian, Alternative Investments Analyst Currency investments are foreign to many investors. Currency trading began in the early 1970s, following the collapse of the Bretton
More informationValue? Growth? Or Both?
INDEX INSIGHTS Value? Growth? Or Both? By: David A. Koenig, CFA, FRM, Investment Strategist 1 APRIL 2014 Key points: Growth and value styles offer different perspectives on potential investment opportunities,
More informationIndex Solutions A Matter of Weight
Index Solutions A Matter of Weight Newsletter No. 11 Our current newsletter is about weight, or more precisely the weighting of equities in an index. Non-market capitalization weighted indices are at present
More informationInvestment Performance Summary
Investment Performance Summary As of 3/31/2015 Individual Investment Options YTD 1 Month 3 Month 1 Blended Equity Benchmark S&P 500 TR USD MSCI ACWI Ex USA NR USD Intermediate-Term Fixed Income TR Intermediate-Term
More informationInvestment Policy Statement
Investment Policy Statement Prepared on: February 04, 2013 Prepared for: Sample Individual Client 432 Elm St Chicago IL 60630 Executive Summary Client Name: Sample Individual Client Client Type: Individual
More informationMarket Efficiency: Definitions and Tests. Aswath Damodaran
Market Efficiency: Definitions and Tests 1 Why market efficiency matters.. Question of whether markets are efficient, and if not, where the inefficiencies lie, is central to investment valuation. If markets
More informationCOUNTRY AND SECTOR DRIVE LOW-VOLATILITY INVESTING IN GLOBAL EQUITY MARKETS
COUNTRY AND SECTOR DRIVE LOW-VOLATILITY INVESTING IN GLOBAL EQUITY MARKETS Sanne de Boer, PhD, CFA; Janet Campagna, PhD; James Norman 1 April 2013 Abstract Low-risk stocks have historically outperformed
More informationWe are motivated to test
James X. Xiong is head of quantitative research at Morningstar Investment Management in Chicago, IL. james.xiong@morningstar.com Thomas M. Idzorek is the president of Morningstar Investment Management
More informationAnswers to Concepts in Review
Answers to Concepts in Review 1. A portfolio is simply a collection of investments assembled to meet a common investment goal. An efficient portfolio is a portfolio offering the highest expected return
More informationSmart beta deep dive. Scott Boniferro CFP CIWM FCSI Product Manager, PowerShares October 20, 2015. This presentation was produced by Invesco Canada.
Smart beta deep dive Scott Boniferro CFP CIWM FCSI Product Manager, PowerShares October 20, 2015 This presentation was produced by Invesco Canada. What is smart beta? 2 What is smart beta? For illustrative
More informationEvolving beyond plain vanilla ETFs
SCHWAB CENTER FOR FINANCIAL RESEARCH Journal of Investment Research Evolving beyond plain vanilla ETFs Anthony B. Davidow, CIMA Vice President, Alternative Beta and Asset Allocation Strategist, Schwab
More informationNew Insights into the Case for Emerging Market Equities
www.brandes.com/institute New Insights into the Case for Emerging Market Equities The robust economic growth associated with emerging markets has attracted the attention of many institutional and private
More informationSTRIKING A BALANCE. How balanced funds help investors gain exposure to upside potential and mitigate downside risk
MFS White Capability Paper Series Focus Month April 2016 2012 Author STRIKING A BALANCE How balanced funds help investors gain exposure to upside potential and mitigate downside risk David W. Connelly
More informationPortfolio Management Consultants Perfecting the Portfolio
Portfolio Management Consultants Perfecting the Portfolio Envestnet PMC is the ultimate advisor to the advisor. Our goal is to help advisors strengthen relationships with their clients and improve outcomes
More informationHigh Yield Fixed Income Credit Outlook
High Yield Fixed Income Credit Outlook Brendan White, CFA Portfolio Manager, Touchstone High Yield Fund Fort Washington Investment Advisors, Inc. September 28, 2011 The opinions expressed are current as
More informationThe active/passive decision in global bond funds
The active/passive decision in global bond funds Vanguard research November 213 Executive summary. This paper extends the evaluation of active versus passive management to global bond funds. Previous Vanguard
More informationLeveraged ETFs, Holding Periods and Investment Shortfalls
Leveraged ETFs, Holding Periods and Investment Shortfalls Ilan Guedj, PhD, Guohua Li, PhD, and Craig McCann, PhD 1 Leveraged and Inverse ETFs replicate the leveraged or the inverse of the daily returns
More informationSAMPLE. CUSTOMIZED FOR: Sample Client. PRESENTED BY: CLS House Account (402) 493-3313 08/05/2014
CUSTOMIZED FOR: PRESENTED BY: CLS House Account (402) 493-3313 08/05/2014 The holdings listed in this proposal are sample allocations for illustration purposes only and may not be representative of current
More informationInvest in Direct Energy
Invest in Direct Energy (Forthcoming Journal of Investing) Peng Chen Joseph Pinsky February 2002 225 North Michigan Avenue, Suite 700, Chicago, IL 6060-7676! (32) 66-620 Peng Chen is Vice President, Direct
More informationLow Volatility Equity Strategies: New and improved?
Low Volatility Equity Strategies: New and improved? Jean Masson, Ph.D Managing Director, TD Asset Management January 2014 Low volatility equity strategies have been available to Canadian investors for
More informationManaging Volatility in Chaotic Markets. Live Webinar July 29, 2010 2:00 3:00 pm EDT
Managing Volatility in Chaotic Markets Live Webinar July 29, 2010 2:00 3:00 pm EDT Welcome What is Volatility Volatility in Context Dave Nadig Director of Research IndexUniverse Managing And Capturing
More informationGeoff Considine, Ph.D.
The Equity Risk Premium In Financial Planning Geoff Considine, Ph.D. Copyright Quantext, Inc. 2006 1 One important issue for portfolio planning is what you assume for the future equity risk premium for
More informationPROVIDING RETIREMENT INCOME WITH STRUCTURED PRODUCTS
PROVIDING RETIREMENT INCOME WITH STRUCTURED PRODUCTS CUBE INVESTING David Stuff david.stuff@cubeinvesting.com ABSTRACT Structured products are an attractive type of investment for income seeking investors.
More informationSchwab Diversified Growth Allocation Trust Fund
Fund Facts Trustee Fund Type Charles Schwab Bank Collective Trust Fund Category Global Asset Allocation Benchmark Global Growth Custom Index 1 Unit Class Inception Date 3/7/2012 Fund Inception Date 3/7/2012
More informationINTERNATIONAL SMALL CAP STOCK INVESTING
INTERNATIONAL SMALL CAP STOCK INVESTING J U N E 3 0, 2 0 1 4 Copyright 2014 by Lord, Abbett & Co. LLC. All rights reserved. Lord Abbett mutual fund shares are distributed by Lord Abbett Distributor LLC.
More informationS-Network Sector Low Volatility Index (SLOWX)
S-Network Sector Low Volatility Index (SLOWX) September 2015 2015 S-Network Global Indexes, 267 Fifth Avenue, New York, NY 10016. Index Rationale Well-Established Universe of Index Candidates S&P 500 Serves
More information