So, I figured since I usually ask for white paper and other bits of research I would star a thread/database for all this stuff. I’ll kick things off. Everest Capital White Paper on Emerging Markets http://www.everestcapital.com/documents/TheEndofEmergingMarkets.pdf
AQR, FirstQuadrant and BlackRock have some good papers
Great idea for a thread! Here are some good ones I’ve read recently: Government Debt and Economic Growth http://www.scribd.com/doc/34947769/Briefing-Paper-271 Placing the 2006/08 Commodity Price Boom into Perspective http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2010/07/21/000158349_20100721110120/Rendered/PDF/WPS5371.pdf Completing the Eurozone rescue: What more needs to be done? http://www.voxeu.org/reports/EZ_Rescue.pdf The Importance of Startups in Job Creation and Job Destruction http://www.kauffman.org/uploadedFiles/firm_formation_importance_of_startups.pdf The Cumulative Impact on the Global Economy of Increased Regulation of the Banking Industry http://www.ebf-fbe.eu/uploads/10-Interim%20NCI_June2010_Web.pdf How the Great Recession was brought to an end http://www.economy.com/mark-zandi/documents/End-of-Great-Recession.pdf Evaluating Conditions in Major Chinese Housing Markets http://www.nber.org/papers/w16189.pdf?new_window=1 Chinese Banks: Informal Securitization Increasingly Distorting Credit Data http://www.scribd.com/doc/34351417/Fitch-on-Chinese-Banks-7-2010 NBER Working papers http://sites.google.com/site/michaelbordo/home2
I second the FirstQuadrant, AQR, and GMO papers and raise you Bridgewater. GMO is only sometimes good though. They seem to be anti-Risk Parity Portfolios for stupid reasons which tends to tick me off. Also, there are some hedge fund managers’ letters to investors that are usually good reads (best bet is to just subscribe to some blogs that refer to 'em, leave it to others to find the good ones).
jmh530 Wrote: ------------------------------------------------------- > (best bet is to just subscribe to some blogs that refer to > 'em, leave it to others to find the good ones). Such as?
> best bet is to just subscribe to some blogs blogs such as…
DarienHacker Wrote: ------------------------------------------------------- > do you need anything other than > http://scholar.google.com/ ? Never played around in that. Got any tips?
ASSet_MANagement Wrote: ------------------------------------------------------- > DarienHacker Wrote: > -------------------------------------------------- > ----- > > do you need anything other than > > http://scholar.google.com/ ? > > > Never played around in that. > > Got any tips? It indexes scholarly publications. It’s fantastic. It obviates this thread in fact. Tips: many papers are only available for download for a fee. If you hit the “show all versions” link you can often find a white paper version, perhaps on the author’s own website, that is substantially the same, and available for free download. If bibliographic references are considered to link papers, then scholar lets you walk forward in time, but not backward. That is, it has links to all papers which cited the one you’re looking at; but you don’t get one-click access to the older papers cited by the current one.
jmh530 Wrote: ------------------------------------------------------- > I second the FirstQuadrant, AQR, and GMO papers > and raise you Bridgewater. GMO is only sometimes > good though. They seem to be anti-Risk Parity > Portfolios for stupid reasons which tends to tick > me off. > Yes GMO papers are hit or miss sometimes but still good reads. But could you share why you disagree with GMO’s argument against risk-parity portfolios? I think they make perfect sense as the rates can only go up from here (hence no risk prem), and leverage and path dependency of the returns. The thing is the fund companies are marketing these products to underfunded plans (the problem which should be addressed by structural changes and more contributions) and to endowments and foundations with high liquidity needs. I think lov vol strategies are still the way to go for these institutions not highly levered balanced funds. CFAMaven Wrote: ------------------------------------------------------- > > best bet is to just subscribe to some blogs > > blogs such as… I am subscribed to Abnormal Returns daily links, CXO Advisory (in RSS) and WorldBeta (in RSS) talks about related topics. FT Alphaville (and Long Room) are excellent blogs altho AV is more macro oriented.
I like this thread. Lots of stuff I had forgotten about and some new ideas too. As for me, I also like John Hussman’s letters at hussmanfunds, and Barry Ritholtz stuff at The Big Picture blog.
itstoohot Wrote: ------------------------------------------------------- > Yes GMO papers are hit or miss sometimes but still > good reads. But could you share why you disagree > with GMO’s argument against risk-parity > portfolios? I think they make perfect sense as the > rates can only go up from here (hence no risk > prem), and leverage and path dependency of the > returns. The thing is the fund companies are > marketing these products to underfunded plans (the > problem which should be addressed by structural > changes and more contributions) and to endowments > and foundations with high liquidity needs. I think > lov vol strategies are still the way to go for > these institutions not highly levered balanced > funds. > I should say I don’t think risk parity is the best idea. All I’m saying is that it is an intriguing idea that they totally straw maned. http://www.scribd.com/doc/27916202/GMO-The-Hidden-Risks-of-Risk-Parity-Portfolios 1) Risk isn’t volatility. I agree, but that just means that you should do the risk parity with something that isn’t simply volatility. This is merely an execution issue. If you constructed a risk parity portfolio so that the contribution to expected conditional VAR is the same, then you can account for tail risk. Alternately, you could use Cornish-Fisher VAR. 2) Leveraging non-existent risk premiums. I mostly agree here, but the leverage is not an essential component of risk parity portfolios. In addition, if we’re doing the above point with expected conditional VAR contributions, then if one asset class has a higher expected return than another but the same variance, skewness, and kurtosis it will be preferred. All else equal, there is a preference towards assets with higher risk premium. Suggesting otherwise is misleading. 3) Negative skew. See number 1, quite easy to incorporate negative skew. I view a strategic asset allocation as what you would allocate if you have no views on the securities you can invest in. There’s no a priori reason why risk parity should be risk parity. Risk parity is merely a special case of allocating portfolios based on expected contribution to some risk measure. In this case, all the contributions are set to equal, but you could set it to market capitalization weights. For instance, the classic risk parity example is that in a 60/40 allocation stocks have a large contribution to risk, so why not set the risk contributions equal and have a 30/70 allocation instead. On the other hand, why not set the contributions equal to market capitalization weights instead. This way you can tie your strategic allocation to the economic importance of the assets. Again as a strategic allocation, it would only be the very first step in creating a portfolio. If it turns out that you expect equities to have a higher return than the returns implied by the strategic allocation, then it might justify leverage. Or if rates are low and you expect them to rise in the future, then it could also mean you don’t use any leverage even if you decide to bump up your risk aversion coefficient when creating the final portfolio.
interesting thread. posting to keep tabs.
I’m currently reading the S&P report on how the VIX is constructed. Too many people in my office like to write options on the VIX and I cannot wait to own them after reading this.
AM, That’s similar to something Mebane Faber has done, except he focuses more on hedge funds. I think the service he created is called Alphaclone and his blog has some similar posts.
jmh530 Wrote: ------------------------------------------------------- > AM, > That’s similar to something Mebane Faber has done, > except he focuses more on hedge funds. I think the > service he created is called Alphaclone and his > blog has some similar posts. Awesome, going to check this out. Thanks. CFAMaven Wrote: ------------------------------------------------------- > Windhamcapital, the CEO is a CFA holder and MIT > lecturer > > http://www.windhamcapital.com/research Amazing.