The Virtue of Complexity in Return Prediction
This article explores how researchers forecast market returns by aggregating expected returns from individual stocks.
About Elisabetta Basilico, PhD, CFA
Dr. Elisabetta Basilico is a seasoned investment professional with an expertise in "turning academic insights into investment strategies." Research is her life's work and by combing her scientific grounding in quantitative investment management with a pragmatic approach to business challenges, she’s helped several institutional investors achieve stable returns from their global wealth portfolios. Her expertise spans from asset allocation to active quantitative investment strategies. Holder of the Charter Financial Analyst since 2007 and a PhD from the University of St. Gallen in Switzerland, she has experience in teaching and research at various international universities and co-author of articles published in peer-reviewed journals. She and co-author Tommi Johnsen published a book on research-backed investment ideas, titled Smarte(er) Investing. How Academic Insights Propel the Savvy Investor. You can find additional information at Academic Insights on Investing.The Aggregated Equity Risk Premium
This article explores how researchers forecast market returns by aggregating expected returns from individual stocks.
How Tiny Price Differences Help Track Small Investors’ Trades
This article explains how researchers studied small investors' trading habits by looking at tiny price differences, called subpennies, in stock trades. They found that the current method to identify these trades isn't very accurate. By using a new approach, they improved the accuracy, helping to better understand how small investors buy and sell stocks.
Making Factor Strategies Work for Everyone
This article explores the difference between tradable and on-paper (theoretical) risk factors in investing. Risk factors are strategies that help explain stock market returns, but many work only in theory and not in real life.
How Trust in Financial Advisors Affects Investment Choices
A study found that when investors trust their advisors more, they are more likely to invest in riskier assets, even if the advisor charges higher fees.
Understanding What Drives Momentum in Global Stock Markets
When information about a company comes out gradually, investors might not react strongly, leading to momentum. Other factors, like how a company's value is perceived, also play a role, but to a lesser extent.
Do Women Receive Worse Financial Advice?
A study based in Hong Kong by using undercover auditors found that female clients were more likely to be advised to invest in individual or local securities instead of getting a mix of different investments.
Understanding Financial Inclusion in the United States
This article explores how many American households have retirement and bank accounts, focusing on those with lower incomes.
How Bond ETFs Make Trading Easier and Cheaper
Bond ETFs have attracted new investors who previously never owned bonds or bond funds. Bond ETFs have made it easier for more people and institutions to start investing in bonds.
Understanding the Stock–Bond Correlation
With over nearly 150 years of data, the study finds that when inflation and interest rates rise, stocks and bonds tend to move together, reducing diversification benefits. This has critical implications for portfolio construction and risk management.
A New Metric for Private Equity Risk Adjusted Returns
This study improves how private equity (PE) fund performance is evaluated, which is crucial for investors making allocation decisions.
Local IPOs and Household Stock Market Participation
This paper seeks to address three pivotal questions that explore the broader economic and social impacts of IPO activity, particularly its role in influencing stock market participation through localized attention and wealth effects.
The Impact of Impact Investing
Divestment, a commonly used strategy, involves withdrawing support from companies that contribute to these issues, with the intention of creating positive societal change. Despite its appeal, the connection between divestment actions and their actual impact on society remains unclear.
Training Machine Learning Models For Return Prediction
This paper investigates how modeling choices impact MLM outcomes such as cross-sectional return predictability.
What the Index Effect’s Disappearance means for Market Efficiency
One critical, yet often overlooked, choice is how stocks are weighted in the objective function during training, with equally weighted (EW) approaches being the norm. This paper investigates how such choices impact cross-sectional return predictability and the performance of trading strategies derived from these predictions, focusing on the interplay between objective function design and model outcomes.
Estimating Long-Term Expected Returns
This study addresses a critical gap in financial forecasting by improving the accuracy of long-term expected return (E(R)) predictions. By evaluating various frameworks and proxies out-of-sample, free from biases like look-ahead bias, it provides more reliable methods for investors to make informed decisions about asset allocations.
Time-Varying Drivers of Stock Prices
This paper examines the time-varying roles of subjective expectations in driving stock price and return variations.
Financial Knowledge in Europe: Women Lag Men in their financial Literacy
This paper examines the level of financial literacy across the 27 EU member states, using data from the 2023 Flash Eurobarometer 525 survey.
Accessing Private Markets: What Does It Cost?
By quantifying how non-performance-based fees dominate the cost structure, this research questions whether current fee models effectively align with investor interests, which could influence future fee arrangements and industry standards.
FinTech Credit and Entrepreneurial Growth
Access to automated online credit boosts sales, transactions, and customer capital for firms, particularly in regions underserved by traditional banks.