Alternative Thinking

It Was the Worst of Times: Diversification During a Century of Drawdowns

We use nearly 100 years of data to evaluate the effectiveness of diversifying investments during the worst of times for most portfolios and find that attempting to tactically avoid equity sell-offs is likely to disappoint.

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Macroeconomics

Some Quant Holiday Market Cheer

This week we look back on 2018 and try to be optimistic about 2019.

Retirement

Intelligent Risk Taking: How to Secure Retirement in a Low Expected Return World

We examine the rate of return needed to deliver a comfortable retirement based on current savings rates as well as intelligent ways to construct portfolios to achieve this rate of return.

Equities

Forecasting the Distribution of Option Returns

We propose a method for constructing conditional option return distributions.

Macroeconomics

A Kinder, Gentler Data Dependence

This week we look at important changes to the Powell Fed's approach to economic data.

Macroeconomics

What Is Your School’s Favorite Economic Surprise?

This week we look at surprises in economic data and try not to play favorites with the releases.

Macroeconomics

Battling the True Myths About the Chinese Economy

This week's Wrap-Up looks beneath the headlines as to what's going on in the Chinese economy.

Market Risk and Efficiency

A Framework for Identifying Accounting Characteristics for Asset Pricing Models, with an Evaluation of Book-to-Price

We provide a framework for identifying accounting numbers that indicate risk and expected return.

Volatility

Meet the Expert: Roni Israelov on Volatility

AQR Principal Roni Israelov answers questions about the volatility risk premium (VRP), including how it is similar to other alternative risk premia and how AQR implements it.

Alternative Investing

Optimal Currency Hedging for International Equity Portfolios

We explore currency exposures in international equity portfolios by decomposing the optimal currency portfolio into a “hedge portfolio,” which minimizes equity volatility, and an “alpha seeking portfolio” based on the well-documented currency styles of value, momentum and carry.

Equities

Characteristics Are Covariances: A Unified Model of Risk and Return

We propose a new modeling approach for the cross section of returns that helps determine whether excess returns to factors are driven by compensation for risk, or an anomaly effect.