INSIGHTS

Please feel free to peruse our research and publications:

FQ Perspectives provide research and perspectives on relevant topics and new ideas.
Strategy Insights is how we share our ideas and outlook on First Quadrant’s (FQ) existing offerings.
Publications include published papers which offer an in-depth and academic view on various concepts.

For a complete listing of all of our publications, download our Bibliography and send us your request.

Strategy Insights

December 2016
by First Quadrant Team
October 2016
by Ben Collins and Scott Tilley
May 2016
by Jeppe Ladekarl
August 2015
by Ed Peters and Bruno Miranda
February 2015
by Ed Peters and Bruno Miranda
February 2015
by Paul Goldwhite and Jia Ye
January 2015
by Jeppe Ladekarl
December 2014
by Ed Peters and Dori Levanoni
November 2014
by Paul Goldwhite and Junyao Zhang
May 2014
by Ed Peters and Jesse Davis
March 2014
by Paul Goldwhite
February 2014
by Ed Peters
January 2014
by Jesse Davis and Ben Collins
January 2014
by Jeppe Ladekarl
January 2013
by Paul Goldwhite & David A. Chrisman
September 2012
by Jeppe Ladekarl and Matthew Michelson, PhD

Publications

December 2017
by Ed Peters
Investment & Pensions Europe (IPE)
Investors worried about the next market downturn are searching for unique ways to diversify their portfolios,and risk parity, a risk-based multi-asset strategy,continues to be an area of interest. Yet, some potential investors remain concerned about the likelihood of rising interest rates and the impact of the higher exposures to bonds that can be found in some traditional risk parity portfolios.

 

December 2013
An Introduction to Risk Parity
by Ed Peters

FTSE Global Markets
This publication provides an introduction to risk parity. It makes the argument that the “risk parity” concept at its core is not necessarily about leveraged bonds. The basic approach is that if assets have a low correlation to each other and similar expected returns, then the risk parity portfolio is optimal, or near optimal. So to explain the concepts behind risk parity, it dispenses with the terms “stocks,” “bonds” and “leverage” and goes back to the basic concepts.
This information is available through the external publication that published the work and retains the copyright to it. To obtain a copy, please contact FQ or the respective publication for the archives

October 2013
Emerging Market Currency: The Common Risk Factor in Emerging Markets
by Jeppe Ladekarl and Ed Peters

The Journal of Investing
As emerging markets have grown in size and sophistication, so have the investment options available to international investors.  In this note, we argue that the set of available EM investment options, both debt and equity, share a common risk factor that drives most of the EM-related risk and return.  We demonstrate empirically that this common risk facto is best represented by EM currencies.
This information is available through the external publication that published the work and retains the copyright to it. To obtain a copy, please contact FQ or the respective publication for the archives

October 2011
Investor Perspectives - Defining FX Beta when treating currencies as an Asset Class
by Dori Levanoni

Currency Investor
This paper asks the question: Are Currencies an “Asset Class”? We could spend pages upon pages making the case (or failing to do so) that currencies represent an “Asset Class”, but in the end we can simplify the argument to answering the question, “Do you care about the impact of currency returns on your portfolio?” If so, then it does represent a “Source of Return”, and so we’ll take the tremendous short cut that whenever you see “Asset Class” in this article, read that as “Source of Return”.
This information is available through the external publication that published the work and retains the copyright to it. To obtain a copy, please contact FQ or the respective publication for the archives

March 2011
Balancing Asset Growth and Liability Hedging through Risk Parity
by Ed Peters

The Journal of Investing
This publication asks the question: Can we balance asset growth with current liability management? That is, can we hedge future and current liabilities at the same time? It argues that a portfolio of essential betas, which balance risk in a manner often referred to as “risk parity,” can achieve such a goal. By contrast, a static policy portfolio or partial LDI hedged approach can fall short even over an extended period of time. In this paper, these three approaches are studied.
This information is available through the external publication that published the work and retains the copyright to it. To obtain a copy, please contact FQ or the respective publication for the archives

October 2009
Diversification and Risk Management: What Volatility Tells Us
by Paul Goldwhite

The Journal of Investing
Every few years an event comes along that shocks financial markets. The majority of investors don’t see it coming—that’s the definition of a shock—and there is usually something different about the latest shock compared to the ones that came before.
While each panic has distinctive features, they also have elements in common. This paper provide an in-depth review of the linkage between expected volatility and financial asset prices and the implications for asset allocation decisions.
This information is available through the external publication that published the work and retains the copyright to it. To obtain a copy, please contact FQ or the respective publication for the archives

July 2008
How Variation in Signal Quality Affects Performance
by Jia Ye

Financial Analysts Journal
The information coefficient (IC), the correlation between forecasted and realized return, is a popular measure of signal quality. As shown in this article, variation in IC is an important source of active risk, and IC variation has an effect on optimal portfolio structure. Contrary to popular belief, the ability to take short positions in equity portfolios does not necessarily lead to superior performance. Managers who can maintain a stable IC over time will benefit from short extensions, but managers who have an unstable IC may see their performance deteriorate from increased short positions.
This information is available through the external publication that published the work and retains the copyright to it. To obtain a copy, please contact FQ or the respective publication for the archives

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