The Case for a Dynamic Beta Strategy

November 9, 2018

“More empirical effort may have been put into testing the CAPM equation than any other result in finance. The results are quite mixed and, in many ways, discouraging.” Mark Rubinstein “The CAPM is a theoretical ‘tour de force’ though ‘empirically vacuous’,” Fama and French The Capital Asset Pricing Model (CAPM) suggests that the return for…

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Using the Volatility Surface to Estimate Expected Returns

September 12, 2018

There are many different ways to estimate returns using quantitative data. The conventional approach is to use a ‘factor model’ which uses predictor variables weighted in some optimal combination to estimate absolute or relative returns. Most factor models combine company fundamental or technical (price and volume) data. Traditional smart beta factors used within these models…

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Ways to Manage Risk

September 18, 2017

Investors are emotional beings, creatures of habit, and as a result, the makers of irrational and untimely decisions when it comes to their portfolios. These emotional responses are called biases and they play havoc with the an investors ability to stick with even the best portfolio during bad times. As we continue to get further…

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ETFs – The Ideal Way to Own Alternatives

August 25, 2017

Alternative strategies are more dynamic and change their risk exposures as a function of market conditions more frequently than a passive strategy. We set out to build the first suite of risk managed ETFs that employ a systematic approach to dynamic asset allocation in a cost efficient and transparent manner. Our risk management overlay is…

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Looking Forward Not Backward When Estimating Volatility

December 1, 2016

When you drive a car, you need to look out your front window and not the rear-view mirror. The same should be true for estimating risk in financial markets. Ironically, most of the “low volatility” products use backward looking information regardless of whether they emphasize low beta or low historical volatility. Typically, this estimation window…

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