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White Paper

What Drives Bond Yields?

In this overview of the various factors that influence government bond yields, we show that both in theory and in the data, non-monetary policy factors drive significant variation in yields, particularly at longer maturities. Despite the exceptionally low yield environments we have witnessed, fundamentals continue to drive bond markets.

Alternative Thinking

2021 Capital Market Assumptions for Major Asset Classes

We update our estimates of medium-term (5- to 10-year) expected returns for major asset classes. We also discuss what investors should expect from the stock-bond correlation in the coming decade.

Alternative Thinking

Fire and Ice: Confronting the Twin Perils of Inflation and Deflation

The COVID-19 pandemic and the responses to it by governments, central banks and consumers have unleashed both disinflationary and inflationary forces, but we do not know which forces will win over the longer term. We explore the historical inflation sensitivities of a range of different investments and present the benefits of both risk-balanced asset allocations and dynamic directional strategies to prepare for uncertain times.

White Paper

It’s Not a Bound; It’s an Opinion

In the second paper of our “Bonds Today” series, we review the popular belief that bond yields are too close to zero to fall much further and then explain why we disagree.

White Paper

Don’t Hate the Asset; Hate the Constraint

What role do bonds play in a portfolio today? We explain why it all depends on investors’ ability to own them in a capital efficient way.

Alternative Thinking

Was That Intentional? Ways to Improve Your Active Risk

Investors try to outperform their strategic asset allocation benchmarks by taking active risks. Some of these are intentional, but others are low-conviction or even unintentional, which can be a large part of a portfolio’s total active risk. When it comes to beating a strategic asset allocation benchmark, reducing these unintentional active risks may among the clearest sources of “low hanging fruit”.

Journal Article

Tail Risk Hedging: Contrasting Put and Trend Strategies

The sharp market fall and speedy recovery during the eventful first half of 2020 has kept tail risk hedging topical: investors have both fresh memories of a painful loss and renewed fears of a repeat. We try to offer a balanced overview of the strengths and weaknesses of direct and indirect tail hedging strategies.

Working Paper

Principal Portfolios

We propose a new asset-pricing framework in which all securities’ signals are used to predict each individual return. While the literature focuses on each security’s own- signal predictability, assuming an equal strength across securities, our framework is flexible and includes cross-predictability.

Working Paper

Biases in Long-Horizon Predictive Regressions

This paper derives the small sample bias of estimators in J horizon predictive regressions, providing a plug-in adjustment for these estimators. A number of surprising results emerge, including a higher bias for overlapping than nonoverlapping regressions despite the greater number of observations and particularly higher bias for an alternative long-horizon predictive regression commonly advocated for in the literature.

Alternative Thinking

2020 Capital Market Assumptions for Major Asset Classes (Supplemental Estimates as of March 31, 2020)

This supplement provides a special update to our estimates of medium-term (5- to 10-year) expected returns for major asset classes. This update reflects the large changes in prices for many asset classes due to the impact of COVID-19 in Q1 2020.