Unlike standard factors, such as value, momentum, and size, quality lacks a commonly accepted definition. Practitioners, however, are increasingly gravitating to the style, defining quality as multi-signal for which some of the signals have been thoroughly explored in academic literature and...

Classical performance attribution methods decompose manager alpha into factor allocation and stock selection components. A manager can produce alpha through factor tilts relative to a benchmark and by stock selection within each factor. However, traditional attribution methods do not explicitly...

Classical performance attribution methods do not explicitly assess managers' dynamic allocation skill in the factor domain. The authors propose a generalized framework for performance attribution that decomposes the allocation effect into value added from both static and dynamic factor exposures...

The main result of this paper is that, in continuous time games with imperfect monitoring it is better to average information over time rather than respond at every instant. The two main reasons why it is better to introduce delayed response to signals are that it helps to (1) loosen...

Option prices predict the cross section of equity returns. We show that, unconditionally, the prices of long-dated options contain all the information relevant for predicting returns. Information, however, shifts towards short-dated options when an earnings announcement is imminent and when...

In our paper — “How Can ‘Smart Beta' Go Horribly Wrong?” — we show, using U.S. data, that the relative valuation of a strategy (in comparison with its own historical norms) is correlated with the strategy's subsequent return at a five-year horizon. The high past performance of many of...

Standard risk management approaches fail to consider parameter uncertainty, which has led to improper risk management. Blind faith in parameter estimates has too often led to blind faith in the resulting VAR outputs, and when these estimates are too often exceeded the proposed solution is...