Written on 04 March 2019.
The paper, entitled "Proverbial Baskets Are Uncorrelated Risk Factors! A Factor-Based Framework for Measuring and Managing Diversification in Multi-Asset Investment Solutions", which was co-authored by Lionel Martellini, Professor of Finance, EDHEC Business School and Director of EDHEC-Risk Institute, together with Vincent Milhau, Research Director at EDHEC-Risk Institute, was originally published in the Multi-Asset Special Issue 2018 of The Journal of Portfolio Management.
Multi-asset investment solutions have become increasingly popular among sophisticated institutional investors focusing on efficient harvesting of risk premia across and within asset classes. One key challenge in the construction of diversified multi-asset portfolio strategies is that even a seemingly well-balanced allocation to many asset classes can eventually translate into a portfolio with a very concentrated set of underlying risk exposures. The authors suggest using a factor-based framework to more effectively measure and manage diversification in multi-asset portfolios.
The Awards were established in 1999, on the 25th anniversary of The Journal of Portfolio Management, to honor Editors Peter Bernstein and Frank Fabozzi for their extraordinary contributions and to promote research excellence in the theory and practice of portfolio management. Recipients of the awards are recognized for their extraordinary research contributions in the theory and practice of portfolio management. Articles published in the Journal’s four regular issues in 2018 as well as in its special Multi-Asset Strategies, Quantitative Strategies, and Stephen A. Ross issues were eligible for the awards.
Edited by Frank Fabozzi and founded in 1974 by Peter L. Bernstein, The Journal of Portfolio Management is the leading editorial source of cutting-edge strategies and analyses for institutional investment management.
You can access the paper "Proverbial Baskets Are Uncorrelated Risk Factors! A Factor-Based Framework for Measuring and Managing Diversification in Multi-Asset Investment Solutions" here.
The research from which this article was drawn was produced as part of the Amundi ETF, Indexing and Smart Beta Investment Strategies research chair at EDHEC-Risk Institute.
Professor Lionel Martellini, is Director of EDHEC-Risk Institute. He conducts research in a broad range of topics related to investment solutions for individual and institutional investors, equity and fixed-income portfolio construction, risk management and derivatives valuation. He was previously on the faculty of the University of Southern California and has held a visiting position at Princeton University. He sits on the editorial boards of various journals, including the Journal of Alternative Investments and the Journal of Portfolio Management. He holds a PhD in Finance from the Haas School of Business, University of California at Berkeley. Outside of his activities in finance, he recently completed a PhD in Relativistic Astrophysics (University Côte d’Azur) and has become a member of the LIGO/Virgo international collaboration for the observation of gravitational waves.
Vincent Milhau is a Research Director at EDHEC-Risk Institute. He holds master's degrees in statistics and economics (ENSAE) and financial mathematics (Université Paris VII), as well as a PhD in Finance from the University of Nice-Sophia Antipolis. His research areas include static and dynamic portfolio optimisation, factor investing and goal-based investing. He has co-authored a number of articles published in several international finance journals.