Global Tactical Cross-Asset Allocation: Applying Value and Momentum Across Asset Classes

In this paper we examine global tactical asset allocation (GTAA) strategies across a broad range of asset classes. Contrary to market timing for single asset classes and tactical allocation across similar assets, this topic has received little attention in the existing literature. Our main finding is that momentum and value strategies applied to GTAA across twelve asset classes deliver statistically and economically significant abnormal returns. For a long top-quartile and short bottom-quartile portfolio based on a combination of momentum and value signals we find a return of 12% per annum over the 1986-2007 period. Performance is stable over time, also present in an out-of-sample period and sufficiently high to overcome transaction costs in practice. The return cannot be explained by potential structural biases towards asset classes with high risk premiums, nor the Fama French and Carhart hedge factors. We argue that financial markets may be macro inefficient due to insufficient ‘smart money’ being available to arbitrage mispricing effects away.momentum;GTAA;global asset allocation;value effect

Portfolio Return Characteristics of Different Industries

Over the last decade we have witnessed the rise and fall of theso-called new economy stocks. One central question is to what extentthese new firms differ from traditional firms. Empirical evidencesuggests that stock returns are not normally distributed. In thisarticle we investigate whether this also holds for portfolios ofstocks from a growth industry. Furthermore, we will compare this typeof portfolios with portfolios of stocks from a more traditionalindustry. Usually, only value weighted and equally weighted portfoliosare used to describe and compare portfolio return characteristics.Instead, in our analysis, we use a novel approach in which we use aninfinite number of portfolios that together represent the set of allfeasible portfolio opportunities.performance evaluation;portfolio management;investments;stock markets;sector index

Health-related quality of life of young adults with Turner syndrome following a long-term randomized controlled trial of recombinant human growth hormone

<p>Abstract</p> <p>Background</p> <p>There are limited long-term randomized controlled trials of growth hormone (GH) supplementation to adult height and few published reports of the health-related quality of life (HRQOL) following treatment. The present follow-up study of young adults from a long-term controlled trial of GH treatment in patients with Turner syndrome (TS) yielded data to examine whether GH supplementation resulted in a higher HRQOL (either due to taller stature or from the knowledge that active treatment and not placebo had been received) or alternatively a lower HRQOL (due to medicalization from years of injections).</p> <p>Methods</p> <p>The original trial randomized 154 Canadian girls with TS aged 7-13 years from 13 centres to receive either long-term GH injections at the pharmacologic dose of 0.3 mg/kg/week or to receive no injections; estrogen prescription for induction of puberty was standardized. Patients were eligible for the follow-up study if they were at least 16 years old at the time of follow-up. The instrument used to study HRQOL was the SF-36, summarized into physical and mental component scales (PCS and MCS); higher scores indicate better HRQOL.</p> <p>Results</p> <p>Thirty-four of the 48 eligible participants (71%) consented to participate; data were missing for one patient. Both groups (GH and no treatment) had normal HRQOL at this post-treatment assessment. The GH group had a (mean ± SD) PCS score of 56 ± 5; the untreated group 58 ± 4; mean score for 16-24 year old females in the general population 53.5 ± 6.9. The GH group had a mean MCS score of 52 ± 6; the untreated group 49 ± 13; mean score for 16-24 year old females in the general population 49.6 ± 9.8. Secondary analyses showed no relationship between HRQOL and height.</p> <p>Conclusions</p> <p>We found no benefit or adverse effect on HRQOL either from receiving or not receiving growth hormone injections in a long-term randomized controlled trial, confirming larger observational studies. We suggest that it remains ethically acceptable as well as necessary to maintain a long-term untreated control group to estimate the effects of pharmacological agents to manipulate adult height. Young adult women with TS have normal HRQOL suggesting that they adjust well to their challenges in life.</p> <p>Trial Registration</p> <p>ClinicalTrials.gov Identifier <a href="http://www.clinicaltrials.gov/ct2/show/NCT00191113">NCT00191113</a>.</p

Risk Aversion and Skewness Preference: a comment

Empirically, co-skewness of asset returns seems to explain a substantial part of the cross-sectional variation of mean return not explained by beta. Thisfinding is typically interpreted in terms of a risk averse representativeinvestor with a cubic utility function. This comment questions thisinterpretation. We show that the empirical tests fail to impose risk aversionand the implied utility function takes an inverse S-shape. Unfortunately, thefirst-order conditions are not sufficient to guarantee that the market portfoliois the global maximum for an inverse S-shaped utility function, and ourresults suggest that the market portfolio is more likely to represent theglobal minimum than the global maximum. In addition, if we impose riskaversion, then co-skewness has minimal explanatory power

Global Tactical Cross-Asset Allocation: Applying Value and Momentum Across Asset Classes

In this paper we examine global tactical asset allocation (GTAA) strategies across a broad range of asset classes. Contrary to market timing for single asset classes and tactical allocation across similar assets, this topic has received little attention in the existing literature. Our main finding is that momentum and value strategies applied to GTAA across twelve asset classes deliver statistically and economically significant abnormal returns. For a long top-quartile and short bottom-quartile portfolio based on a combination of momentum and value signals we find a return of 12% per annum over the 1986-2007 period. Performance is stable over time, also present in an out-of-sample period and sufficiently high to overcome transaction costs in practice. The return cannot be explained by potential structural biases towards asset classes with high risk premiums, nor the Fama French and Carhart hedge factors. We argue that financial markets may be macro inefficient due to insufficient ‘smart money’ being available to arbitrage mispricing effects away

The Volatility Effect: Lower Risk without Lower Return

We present empirical evidence that stocks with low volatility earn high risk-adjusted returns. The annual alpha spread of global low versus high volatility decile portfolios amounts to 12% over the 1986-2006 period. We also observe this volatility effect within the US, European and Japanese markets in isolation. Furthermore, we find that the volatility effect cannot be explained by other well-known effects such as value and size. Our results indicate that equity investors overpay for risky stocks. Possible explanations for this phenomenon include (i) leverage restrictions, (ii) inefficient two-step investment processes, and (iii) behavioral biases of private investors. In order to exploit the volatility effect in practice we argue that investors should include low risk stocks as a separate asset class in the strategic asset allocation phase of their investment process