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Alternative Thinking

Active and Passive Investing — The Long-Run Evidence

More careful thinking is needed to separate facts from fiction in the hotly contested debate between active and passive investing.

Perspective

Putting Parity Performance Into Perspective

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.

Alternative Thinking

Tail-Hedging Strategies

Tail hedges are one way to potentially limit losses in adverse markets—but at a substantial cost. We discuss alternative approaches, such as trend-following strategies, which are more cost-effective and may offer portfolio protection in market downdrafts

Alternative Thinking

Estimating Long Term Expected Returns

Diversification is underutilized in most institutional portfolios but may improve risk-adjusted returns, active returns and total returns more reliably than concentrated positions.

Perspective

Introducing “Words From the Wise” Interview Series

AQR's “Words From the Wise” interview series shares research and insights from industry leaders, giving us all the opportunity to become better investors.

Alternative Thinking

2014 Capital Market Assumptions for Major Asset Classes

We present our capital market assumptions for major asset classes and explore justifiable frameworks for estimating multi-year expected returns.

Perspective

The Hedgie in Winter

Cliff explains once again why hedge fund returns shouldn’t be compared to 100% long equities, how to do a more proper comparison, and then shares results.

Alternative Thinking

Strategic Portfolio Construction

When it comes to portfolio construction, many investors seek guidance on “putting it all together.” We discuss our systematic approach and examine how investor-specific beliefs and constraints can inform and interact with formal optimization methods.

Alternative Thinking

Should Investors Worry About Rising Real Yields?

We document the response of various asset classes and strategies in historical episodes of sharply rising real bond yields—and found that investor portfolios tend to suffer less in bond-related tail events than in equity-related tail events.

Perspective

Risk Parity: Why We Lever

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.