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White Paper
Don’t Hate the Asset; Hate the Constraint
November 20, 2020
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.
Working Paper
Beyond Basis Basics: Leverage Demand and Deviations from the Law of One Price
February 7, 2020
Bases are driven by intermediaries’ cost of capital and the amount of leverage demand for an asset. Focusing on leverage demand, we find bases negatively predict futures and spot market returns with the same sign in both global equities and currencies.
Perspective
Putting Parity Performance Into Perspective
December 3, 2015
Cliff discusses the blame placed on risk parity for having caused the market’s August sell-off. Critics made a silly choice to go all tin-foil-hat instead of just doing what people usually do—attack recent performance.
Perspective
Risk Parity: The Dog That Did Not Bite
September 21, 2015
Commentators are blaming risk parity as a driving force behind August's equity market volatility. We think this is short-term silliness, and explain why we believe risk parity isn't the cause.
Perspective
Risk Parity Is Even Better Than We Thought
June 1, 2015
It’s not all or nothing when it comes to risk parity. Investors typically think they should be all 60/40 or all risk parity, but we think there's merit in adding risk parity to an existing 60/40 portfolio.
Perspective
Yes, Lever, but With Care
February 13, 2015
Conventional wisdom holds that sensible investors avoid leverage. Cliff Asness argues that, if prudently employed, portfolio leverage can be beneficial in modest doses, with proper concern for its dangers.
Perspective
Risk Parity: Why We Lever
September 24, 2014
The role of leverage in risk parity is often misunderstood. For risk parity investors, there may be benefits to using modest leverage—it helps them build a more diversified, more balanced, and potentially higher-return-for-the-risk-taken portfolio.
Journal Article
Leveraged Exchange-Traded Funds: Admissible Leverage and Risk Horizon
December 18, 2012
In view of the increasing popularity of exchange-traded funds and their leveraged counterparts, the authors assert that it is important for investors to better evaluate the risk involved.
Alternative Thinking
Why Do Most Investors Choose Concentration Over Leverage?
2Q 2012
Return-seeking investors must take risks—the question is which to take and to understand the tradeoffs involved. Most investors choose concentration risk, but we present arguments for a different approach.
Journal Article
The Pitfalls of Leveraged and Inverse ETFs
May 1, 2009
As market volatility reaches historic highs, investors have responded in various ways, including investing in funds that aim to deliver returns that are either a positive or inverse multiple of a stated index.