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Perspective
Response to Thomas Hoenig’s “Why ‘Risk-Based’ Capital Is Far Too Risky”
August 18, 2016
My colleagues have written a response to Thomas Hoenig's recent WSJ op-ed "Why 'Risk-Based' Capital Is Far Too Risky." Hoenig's recommended approach to managing leverage risk using a "simple" notional leverage limit reminds us of Einstein's famous purported comment to make things as simple as possible, but not simpler. The authors believe that Hoenig's approach fails to meet the Einstein test.
Perspective
Factor Investing Explicitly Tries to Look Lousy on Active Share
November 10, 2016
There has been much ink, and maybe even some blood, spilled debating the merits of “Active Share” for judging an investment fund. Cliff reviews the frequent misueses of active share, especially related to applying it factor investing
Perspective
The Illiquidity Discount?
December 19, 2019
Conventional wisdom is you get an expected return premium for bearing illiquidity. But what if this is backwards? What if investors will actually pay a higher price and accept a lower expected return for very illiquid assets?
Perspective
Looking for the Intuition Underlying Multi-Factor Stock Selection
February 8, 2019
Cliff points out that although the benefits of combining factors into a diversified portfolio are large and well understood, one obstacle for many is gaining intuition about results. He tries to help.
Journal Article
Which Risks Have Been Best Rewarded?
December 1, 2004
An empirical study examines the consistency of rewards for bearing various types of risks in U.S.
Journal Article
Deactivating Active Share
January 6, 2016
The authors investigate Active Share, a measure meant to determine the level of active management in investment portfolios, and find it wanting.
Journal Article
Working Your Tail Off: Active Strategies vs. Direct Hedging
June 1, 2015
Economic theory and empirical evidence support the idea that investors should, over the long term, be compensated for bearing risk.
Perspective
But What About October?
November 23, 2018
This year of pain in liquid alternatives has continued. Cliff shows the results of an AQR representative liquid alts portfolio and based on an analysis of it, discusses how our investment process and our long-term liquid alts record remains sound, how October was disappointing but not a particularly abnormal outcome, and how our process has been well-behaved over time, particularly compared with the market portfolio.
Perspective
Perhaps the Most Important Essay I Will Ever Co-Author
March 1, 2018
We model when a hockey coach should pull the goalie when trailing and then discuss how our results relate to key lessons for portfolio and risk management, and business in general.
Interview
Words From the Wise: Robert Engle on Portfolio Management
October 2, 2017
This issue of "Words from the Wise" features an interview with Robert Engle, Nobel prize winner and father of risk modeling. Engle discusses his breakthrough research on analyzing economic time series with time-varying volatility.