Strategies to Mitigate Tail Risk

By |May 26th, 2022|Quality Investing, Crisis Alpha, Research Insights, Factor Investing, Larry Swedroe, Trend Following, Academic Research Insight, Momentum Investing Research|

Investors care about more than just returns. They also care about risk. Thus, prudent investors include consideration of strategies that can provide at least some protection against adverse events that lead to left tail risk (portfolios crashing). The cost of that protection (the impact on expected returns) must play an important role in deciding whether to include them. For example, buying at-the-money puts, a strategy that eliminates downside risk, should have returns no better than the risk-free rate of return, making that a highly expensive strategy.

Are Financial Crises Predictable?

By |March 14th, 2022|Crisis Alpha, Research Insights, Factor Investing, Trend Following, Basilico and Johnsen, Academic Research Insight, Managed Futures Research|

Who among us wouldn't want to be the savior that predicts a market crisis and saves our clients from losses in capital -- or even better -- profits from them? A central topic of interest for academics is whether there are more precise tools to predict financial crises. Those who believe so dedicate their efforts to finding early warning indicators.

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