scholarly journals Value Return Predictability across Asset Classes and Commonalities in Risk Premia*

2020 ◽  
Author(s):  
Fahiz Baba Yara ◽  
Martijn Boons ◽  
Andrea Tamoni
Keyword(s):  
Risk Premia ◽  
Return Predictability ◽  
Expected Returns ◽  
Government Bonds ◽  
Common Component ◽  
Common Value ◽  
Asset Class ◽  
Asset Classes ◽  
Global Government ◽  
Stock Indexes

Abstract We show that returns to value strategies in individual equities, industries, commodities, currencies, global government bonds, and global stock indexes are predictable in the time series by their respective value spreads. In all these asset classes, expected value returns vary by at least as much as their unconditional level. A single common component of the value spreads captures about two-thirds of value return predictability and the remainder is asset class specific. We argue that common variation in value premia is consistent with rationally time-varying expected returns, because (i) common value is closely associated with standard proxies for risk premia, such as the dividend yield, intermediary leverage, and illiquidity, and (ii) value premia are globally high in bad times.

Real Natural Assets: The Real Green Investment Alternative

2019 ◽  
Keyword(s):  
Performance Analysis ◽  
Expected Returns ◽  
Financial Benefit ◽  
Investment Performance ◽  
Liquidity Shocks ◽  
Asset Class ◽  
Green Investment ◽  
Asset Classes ◽  
Green Investments ◽  
Risk Association

The authors present an analysis of green investment performance grouped into two broad categories: non-real green assets and real green assets. They seek to identify which green investment alternatives offer greater financial benefit and are thus more attractive to investors and investigate some of the intrinsic risks associated with this asset class. The performance analysis is based on the study of the expected returns, volatility, diversification potential, downside risk, association with inflation, and exposure to liquidity shocks in stock markets of real and non-real green assets, comparing them with those of traditional asset classes (such as equity, bonds, and real estate) and other non-traditional assets, namely infrastructure. The findings indicate that real green assets, in particular, may represent the appropriate alternative in the adoption of green investments.

scholarly journals Navigating the factor zoo around the world: an institutional investor perspective

2021 ◽  
Author(s):  
Söhnke M. Bartram ◽  
Harald Lohre ◽  
Peter F. Pope ◽  
Ananthalakshmi Ranganathan
Keyword(s):  
Stock Return ◽  
Institutional Investor ◽  
Return Predictability ◽  
Investment Strategies ◽  
Fixed Income ◽  
Stock Return Predictability ◽  
Cross Sectional ◽  
The World ◽  
Cast Doubt ◽  
Asset Classes

AbstractThe literature on cross-sectional stock return predictability has documented over 450 factors. We take the perspective of an institutional investor and navigate this zoo of factors by focusing on the evidence relevant to the practicalities of factor-based investment strategies. Establishing a sound theoretical rationale is key to identifying “true” factors, and we emphasize the need to recognize data-mining concerns that may cast doubt on the relevance of many factors. From a practical investment perspective, much of the factor evidence documented by academics may be more apparent than real. The performance of many factors is dependent on the inclusion of small- and micro-cap stocks in academic studies, although such stocks would likely be excluded from the real investment universe due to illiquidity and transaction costs. Nevertheless, a parsimonious set of factors emerges in equities and other asset classes, including currencies, fixed income, and commodities. These factors can serve as meaningful ingredients to factor-based portfolio construction.

scholarly journals A critical evaluation of risk-return characteristics of environmentally focused stock’s companies

2013 ◽  
Vol 61 (2) ◽  
pp. 501-506
Author(s):  
Stanislav Škapa ◽  
Tomáš Meluzín ◽  
Marek Zinecker
Keyword(s):  
Critical Evaluation ◽  
Risk Return ◽  
Ex Post ◽  
Asset Class ◽  
Asset Classes

The objective of the paper is to critically evaluate and determine risk-return profile environmentally focused stock’s companies which are covered by STOXX Global ESG Environmental Leaders Index and whether this index should be taken in as an independent asset class of investments portfolio for its risk-return improvement. This paper gives an empirical view on the ex-post asset classes characteristics focused mainly on risk side of investment.

Asset Allocation vs. Factor Allocation—Can We Build a Unified Method?

2019 ◽  
Keyword(s):  
Asset Allocation ◽  
Building Blocks ◽  
Unified Framework ◽  
Intuitive Appeal ◽  
Optimal Allocations ◽  
Asset Class ◽  
Asset Classes ◽  
Unified Method

There is increasing interest in the idea of allocating across factors instead of across traditional asset classes. Allocating across factors has the intuitive appeal of allocating across building blocks that are in theory purer sources of return. In practice, factor-based allocation is not easy: Factors are unobservable and must be specified. However, the authors believe there is merit in integrating insights from factors with traditional asset allocation. Information and views about factors and asset classes can be a powerful combination. In this article, the authors present a framework for combining the two paradigms in an innovative way, resulting in optimal allocations that blend insights from both paradigms. Specifically, their approach derives asset class return prediction from factor-based asset allocation, which allows construction of portfolios for various investment objectives from a unified framework.

scholarly journals Conditional Risk Premia in Currency Markets and Other Asset Classes

2013 ◽  
Author(s):  
Martin Lettau ◽  
Matteo Maggiori ◽  
Michael Weber
Keyword(s):  
Risk Premia ◽  
Currency Markets ◽  
Conditional Risk ◽  
Asset Classes

scholarly journals Testing Beta-Pricing Models Using Large Cross-Sections

2019 ◽  
Vol 33 (6) ◽  
pp. 2796-2842 ◽  
Author(s):  
Valentina Raponi ◽  
Cesare Robotti ◽  
Paolo Zaffaroni
Keyword(s):  
Cross Sections ◽  
Risk Premia ◽  
Expected Returns ◽  
Firm Characteristics ◽  
Pricing Models ◽  
Cross Sectional ◽  
Misspecified Models ◽  
Oxford University ◽  
Fama French Factors ◽  
Published Paper

Abstract We propose a methodology for estimating and testing beta-pricing models when a large number of assets is available for investment but the number of time-series observations is fixed. We first consider the case of correctly specified models with constant risk premia, and then extend our framework to deal with time-varying risk premia, potentially misspecified models, firm characteristics, and unbalanced panels. We show that our large cross-sectional framework poses a serious challenge to common empirical findings regarding the validity of beta-pricing models. In the context of pricing models with Fama-French factors, firm characteristics are found to explain a much larger proportion of variation in estimated expected returns than betas. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Tail risk premia and return predictability

2015 ◽  
Vol 118 (1) ◽  
pp. 113-134 ◽  
Author(s):  
Tim Bollerslev ◽  
Viktor Todorov ◽  
Lai Xu
Keyword(s):  
Risk Premia ◽  
Return Predictability ◽  
Tail Risk
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