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EDHEC-Risk Newsletter

May 07, 2014
Asset Management Research


EDITORIAL

Index Transparency - a Survey
<http://front.edhec-risk.com/r/?c/356a/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ> Between
August and November 2013, EDHEC-Risk Institute surveyed institutional
end-investors across Europe on their perceptions and expectations with respect
to the governance and transparency of indices. The survey's 109 respondents
include Europe's largest pension and reserve funds, insurance and provident
institutions and their asset management subsidiaries. Hailing from 20 countries
and dependencies, respondents collectively provide protection to hundreds of
millions of scheme participants and clients in Europe and beyond. More...
<http://front.edhec-risk.com/r/?c/356b/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ>


INDUSTRY ANALYSIS

Alphas and the Choice of Rate of Return in Regressions
<http://front.edhec-risk.com/r/?c/356c/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ> Alpha has
had a remarkably long run as the Holy Grail of investment. Many investment
managers claim to have alpha, and all desire it. A top investment web site is
called Seeking Alpha. The Financial Times's daily news commentary on financial
markets is named Alphaville. Journalist Sebastian Mallaby, in his 2010 paean to
hedge funds, "More Money Than God," rests his case for the superiority of hedge
funds in general on one academic study's conclusion that although the average
hedge fund trailed the S&P 500, it earned three percentage points of alpha. The
persistence of the impression that small company stocks are superior to large
company stocks is due chiefly to a finding of positive small-cap stock alpha in
a 30-year-old paper. It is no coincidence that "alpha" is to investment machismo
what "alpha male" is to manhood. Yet arguments for the value of alpha are
tenuous. More...
<http://front.edhec-risk.com/r/?c/356d/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ>

Mutual and Hedge Fund Industries in Marketing Conflict
<http://front.edhec-risk.com/r/?c/356e/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ> US hedge
funds have been allowed a new freedom to market themselves to the public at
large, against the intense opposition of the mutual fund industry. Even top
hedge funds are not enthusiastic. The Jumpstart Our Business Start-ups Act,
signed in 2012, made it easy for small fledging companies to be more accessible
to investors. It was widely believed at the time that the act was not intended
to give hedge funds greater freedom, as opposed to facilitating wider industry
start-ups. But in fact it did so. More...
<http://front.edhec-risk.com/r/?c/356f/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ>


FEATURES

The EDHEC European ETF Survey 2013
<http://front.edhec-risk.com/r/?c/356g/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ> The latest
edition of the European ETF Survey has been conducted as part of the Amundi ETF
& Indexing "Core-Satellite and ETF Investment" research chair at EDHEC-Risk
Institute. This chair analyses the developments in the use of exchange-traded
funds as part of the asset allocation process and looks at advanced forms of
risk budgeting within the framework of a core-satellite approach. With the
survey, we aim to analyse the current practices and perceptions among ETF users
in Europe and by comparing our results with those of our previous surveys, we
intend to shed light on trends within the European ETF market. More...
<http://front.edhec-risk.com/r/?c/356h/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ>


INTERVIEW

Merrill Lynch Wealth Management and EDHEC Business School join forces to advance
goals-based wealth management - an interview with Anil Suri
<http://front.edhec-risk.com/r/?c/356i/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ> In this
month's interview, we speak to Anil Suri, Managing Director and Head of
Portfolio Construction & Investment Analytics at Merrill Lynch Wealth Management
about the creation by Merrill Lynch Wealth Management and EDHEC-Risk Institute
of a research chair on "Risk Allocation and Goals-Based Wealth Management." Anil
Suri also discusses the role of research in Merrill Lynch Wealth Management's
overall business strategy. More...
<http://front.edhec-risk.com/r/?c/356j/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ>


EDHEC PUBLICATIONS

The Fund of Hedge Fund Selection Puzzle: A Pragmatic Approach to Identify the
X-Factor
<http://front.edhec-risk.com/r/?c/356k/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ> Serge
Darolles, Mathieu Vaissié. The authors use the regime switching approach
introduced in Pelletier (2006), and adapted by Giamouridis and Vrontos (2007) to
the context of hedge fund portfolios, to design a new tactical style allocation
factor. They then propose to leverage on this factor to identify fund of hedge
fund managers who turn out to be good at capturing the upside while controlling
for the downside risk. By so doing, they provide investors with a pragmatic
though robust approach to address the fund of hedge fund selection puzzle.
More...
<http://front.edhec-risk.com/r/?c/356l/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ>

Asset Prices in General Equilibrium with Transactions Costs and Recursive
Utility
<http://front.edhec-risk.com/r/?c/356m/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ> 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. The
securities traded in the financial market include a one-period bond and multiple
risky stocks. The paper shows how the problem of identifying the equilibrium can
be characterized in a recursive fashion even in the presence of transactions
costs, which make markets incomplete. It finds that transactions costs on stocks
or the bond lead investors to reduce the magnitude of their positions in
financial assets. More...
<http://front.edhec-risk.com/r/?c/356n/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ>


EDHEC-RISK NEWS

PhD in Finance programme adds six alumni
<http://front.edhec-risk.com/r/?c/356o/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ> Over the
course of the last six months, six EDHEC-Risk Institute PhD candidates have
successfully defended their dissertations. Their research work brings new
insights on strategic and tactical asset allocation, inflation modelling and
hedging, asset pricing, corporate financial policy, pension fund management, and
systemic risk. More...
<http://front.edhec-risk.com/r/?c/356p/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ>

EDHEC-Risk Days Asia conference to take place in Singapore
<http://front.edhec-risk.com/r/?c/356q/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ> Organised by
an academic research centre for the benefit of professionals, EDHEC-Risk Days
Asia is an annual conference taking place in Singapore, which presents the
research conducted by EDHEC-Risk Institute and discusses it with the
institutional investment and wealth management communities. More...
<http://front.edhec-risk.com/r/?c/356r/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ>

New Yale School of Management-EDHEC-Risk Institute executive seminar unveiled
<http://front.edhec-risk.com/r/?c/356s/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ> 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...
<http://front.edhec-risk.com/r/?c/356t/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ>

Professor Lionel Martellini presenting at 67th CFA Institute annual conference
<http://front.edhec-risk.com/r/?c/356u/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ> The flagship
CFA Institute Annual Conference rotates continents each year and is one of the
investment industry's largest and longest running educational gatherings of
investment professionals, attracting as many as 1,800 delegates from 70
countries in prior years. Lionel Martellini, Scientific Director of EDHEC-Risk
Institute and Professor of Finance at EDHEC Business School, has been invited to
speak at the event and will make a presentation entitled, "New Frontiers in Risk
and Asset Allocation." More...
<http://front.edhec-risk.com/r/?c/356v/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ>

Felix Goltz discusses Asia-Pacific index practices in CFA Institute webcast
<http://front.edhec-risk.com/r/?c/356w/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ> In a CFA
Institute webcast entitled, "Asia Pacific Index Investing Practices: A Global
Comparison", Dr. Felix Goltz, Head of Applied Research at EDHEC-Risk Institute,
discusses the index investing practices in the Asia Pacific region based on
results of the EDHEC-Risk Asian Index survey. The practices in Asia are compared
to those in North America and Europe, which are based on the EDHEC-Risk North
American Index survey and the EDHEC-Risk European Index survey. More...
<http://front.edhec-risk.com/r/?c/356x/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ>


Events

CFA Institute/EDHEC-Risk Advances in Asset Allocation Seminar, London & New York
<http://front.edhec-risk.com/r/?c/356y/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ>

Yale School of Management - EDHEC-Risk Institute Fixed-Income Investment
Seminar, New Haven & London
<http://front.edhec-risk.com/r/?c/356z/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ>

EDHEC-Risk Days Asia, Singapore
<http://front.edhec-risk.com/r/?c/3570/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ>


Books

Introduction to Risk Parity and Budgeting
<http://front.edhec-risk.com/r/?c/3571/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ>
<http://front.edhec-risk.com/r/?c/3572/aGJpZGVuQHJvc2Vtb250c2VuZWNhLmNvbQ>


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