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Low-volatility Investing
Low-volatility investing is an investment style that buys Stock market, stocks or Security (finance), securities with low volatility and avoids those with high volatility. This investment style exploits the low-volatility anomaly. According to Capital asset pricing model, financial theory risk and return should be positively related, however in practice this is not true. Low-volatility investors aim to achieve market-like returns, but with lower risk. This investment style is also referred to as Minimum variance set, minimum volatility, Modern portfolio theory, minimum variance, managed volatility, smart beta, defensive and conservative investing. History The low-volatility anomaly was already discovered in the early 1970s, yet it only became a popular investment style after the 2008 global financial crises. The first tests of the Capital asset pricing model, Capital Asset Pricing Model (CAPM) showed that the risk-return relation was too flat. Two decades later, in 1992 the semina ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Investment Style
Investment style, is a term in investment management (and more generally, in finance), referring to how a characteristic investment philosophy is employed by an investor or fund manager. Investment Philosophies Aswath Damodaran Here, for example, one manager favors Small capitalization, small cap stocks, while another prefers large blue-chip stocks. The classification extends across asset classes — Stock, equities, Bond (finance), bonds or financial derivatives — and within each further weighs factors such as Leverage (finance), leverage, momentum investing, momentum, diversification (finance), diversification benefits, value stock, relative value or growth stock, growth prospects. Major style choices include the following: *Active vs. Passive: acti ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
MSCI
MSCI Inc. (formerly Morgan Stanley Capital International) is an American finance company headquartered in New York City. MSCI is a global provider of equity, fixed income, real estate indices, multi-asset portfolio analysis tools, ESG and climate finance products. It operates the MSCI World, MSCI Emerging Markets, and MSCI All Country World (ACWI) indices, among others. The company is headquartered at 7 World Trade Center in Manhattan. Its business primarily consists of licensing its indices to index funds, such as exchange-traded funds (ETFs), which pay a fee of around 0.02 to 0.04 percent of the invested volume for the use of the index. funds worth over 16.5 trillion US$ were based on MSCI indices. History In 1968, Capital International published indices covering the global stock market for non-U.S. markets. In 1986, Morgan Stanley licensed the rights to the indices from Capital International and branded the indices as the Morgan Stanley Capital International (MSCI) ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Eric Falkenstein
Eric Falkenstein (born 14 August 1965) is an American financial economist and an expert in the field of low-volatility investing. He is an academic researcher, blogger, quant portfolio manager, and book author. Education Falkenstein received his economics PhD from Northwestern University in 1994, and wrote his dissertation on the low return to high volatility stocks. Career He was a teaching assistant for Hyman Minsky at Washington University in St. Louis. He set up a value at risk system for trading operations at KeyCorp bank, then a firm-wide economic risk capital allocation methodology. He was a founding researcher of RiskCalc, Moody's private firm default probability model, the premier private firm default model in the world. He has been an equity portfolio manager at Pine River Capital Management and developed trading algorithms for Walleye Software. He is currently working on Ethereum contracts. Writing Falkenstein has blogged for many years and was among the top ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Momentum Investing
Momentum investing is a system of buying stocks or other securities that have had high returns over the past three-to-twelve months, and selling those that have had poor returns over the same period. While momentum investing is well-established as a phenomenon no consensus exists about the explanation for this strategy, and economists have trouble reconciling momentum with the efficient market hypothesis and random walk hypothesis. Two main hypotheses have been submitted to explain the momentum effect in terms of an efficient market. In the first, it is assumed that momentum investors bear significant risk for assuming this strategy, and, therefore, the high returns are a compensation for the risk. Momentum strategies often involve disproportionately trading in stocks with high bid–ask spreads; thus, it is important to take transactions costs into account when evaluating momentum profitability. The second theory assumes that momentum investors are exploiting behavioral shortcomin ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Investment Style
Investment style, is a term in investment management (and more generally, in finance), referring to how a characteristic investment philosophy is employed by an investor or fund manager. Investment Philosophies Aswath Damodaran Here, for example, one manager favors Small capitalization, small cap stocks, while another prefers large blue-chip stocks. The classification extends across asset classes — Stock, equities, Bond (finance), bonds or financial derivatives — and within each further weighs factors such as Leverage (finance), leverage, momentum investing, momentum, diversification (finance), diversification benefits, value stock, relative value or growth stock, growth prospects. Major style choices include the following: *Active vs. Passive: acti ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Low-volatility Anomaly
In investing and finance, the low-volatility anomaly is the observation that low-volatility securities have higher returns than high-volatility securities in most markets studied. This is an example of a stock market anomaly since it contradicts the central prediction of many financial theories that higher returns can only be achieved by taking more risk. The capital asset pricing model (CAPM) predicts a positive and linear relation between the systematic risk exposure of a security (its beta) and its expected future return. However, the low-volatility anomaly falsifies this prediction of the CAPM by showing that higher beta stocks have historically underperformed lower beta stocks. Additionally, stocks with higher idiosyncratic risk often yield lower returns compared to those with lower idiosyncratic risk. The anomaly is also document within corporate bond markets. The low-volatility anomaly has also been referred to as the low-beta, minimum-variance, minimum volatility an ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Interest Rate Risk
Interest rate risk is the risk that arises for bond owners from fluctuating interest rate An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, ...s. How much interest rate risk a bond has depends on how sensitive its price is to interest rate changes in the market. The sensitivity depends on two things, the bond's time to maturity, and the coupon rate of the bond. Calculation Interest rate risk analysis is almost always based on simulating movements in one or more yield curves using the Heath-Jarrow-Morton framework to ensure that the yield curve movements are both consistent with current market yield curves and such that no riskless arbitrage is possible. The Heath-Jarrow-Morton framework was developed in the early 1991 by David Heath of Cornell University, Andrew Morton of Lehman ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Dot-com Bubble
The dot-com bubble (or dot-com boom) was a stock market bubble that ballooned during the late-1990s and peaked on Friday, March 10, 2000. This period of market growth coincided with the widespread adoption of the World Wide Web and the Internet, resulting in a dispensation of available venture capital and the rapid growth of valuations in new dot-com Startup company, startups. Between 1995 and its peak in March 2000, investments in the NASDAQ composite stock market index rose by 80%, only to fall 78% from its peak by October 2002, giving up all its gains during the bubble. During the dot-com crash, many online shopping companies, notably Pets.com, Webvan, and Boo.com, as well as several communication companies, such as Worldcom, NorthPoint Communications, and Global Crossing, failed and shut down. Others, like Lastminute.com, MP3.com and PeopleSound were bought out. Larger companies like Amazon (company), Amazon and Cisco Systems lost large portions of their market capitalizati ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
David C
David (; , "beloved one") was a king of ancient Israel and Judah and the third king of the United Monarchy, according to the Hebrew Bible and Old Testament. The Tel Dan stele, an Aramaic-inscribed stone erected by a king of Aram-Damascus in the late 9th/early 8th centuries BCE to commemorate a victory over two enemy kings, contains the phrase (), which is translated as " House of David" by most scholars. The Mesha Stele, erected by King Mesha of Moab in the 9th century BCE, may also refer to the "House of David", although this is disputed. According to Jewish works such as the '' Seder Olam Rabbah'', '' Seder Olam Zutta'', and '' Sefer ha-Qabbalah'' (all written over a thousand years later), David ascended the throne as the king of Judah in 885 BCE. Apart from this, all that is known of David comes from biblical literature, the historicity of which has been extensively challenged,Writing and Rewriting the Story of Solomon in Ancient Israel; by Isaac Kalimi; page 3 ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Arbitrage Pricing Theory
In finance, arbitrage pricing theory (APT) is a multi-factor model for asset pricing which relates various macro-economic (systematic) risk variables to the pricing of financial assets. Proposed by economist Stephen Ross (economist), Stephen Ross in 1976, it is widely believed to be an improved alternative to its predecessor, the capital asset pricing model (CAPM). APT is founded upon the law of one price, which suggests that within an equilibrium market, rational investors will implement arbitrage such that the equilibrium price is eventually realised. As such, APT argues that when opportunities for arbitrage are exhausted in a given period, then the expected return of an asset is a linear function of various factors or theoretical market indices, where sensitivities of each factor is represented by a factor-specific beta coefficient or factor loading. Consequently, it provides traders with an indication of ‘true’ asset value and enables exploitation of market discrepancies via ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Jensen's Alpha
In finance, Jensen's alpha (or Jensen's Performance Index, ex-post alpha) is used to determine the abnormal return of a security or portfolio of securities over the theoretical expected return. It is a version of the standard alpha based on a theoretical performance instead of a market index. The security could be any asset, such as stocks, bonds, or derivatives. The theoretical return is predicted by a market model, most commonly the capital asset pricing model (CAPM). The market model uses statistical methods to predict the appropriate risk-adjusted return of an asset. The CAPM for instance uses beta as a multiplier. History Jensen's alpha was first used as a measure in the evaluation of mutual fund managers by Michael Jensen in 1968. The CAPM return is supposed to be 'risk adjusted', which means it takes account of the relative riskiness of the asset. This is based on the concept that riskier assets should have higher expected returns than less risky assets. If an asset's ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
