Noël Amenc, Philippe Malaise, Lionel Martellini, Daphné Sfeir: Even though there is little evidence of predictability in stock specific risk, most equity market neutral managers still rely on stock picking as the preferred way to generate abnormal returns.
Professor of Finance, EDHEC Graduate School of BusinessHead of Research, Misys Asset Management Systems
Research Associate, EDHEC Risk and Asset Management Research Centre
Professor of Finance, EDHEC Graduate School of Business
Senior research engineer, EDHEC Risk and Asset Management Research Centre
In this paper, we document the benefits of a new form of market-neutral portfolio strategy that aims at delivering absolute return over the full business cycle through systematic equity style timing decisions. Using a robust multi-factor recursive modelling approach, we find strong evidence of predictability in value and size style differentials. We use these econometric forecasts to generate systematic style timing allocation decisions. These portfolio decisions can be implemented using Exchange Traded Funds on US style indexes.
|Research Cluster :||Finance|