Profile cover photo
Profile photo
AlphaBetaWorks
4 followers -
Investment Risk Management, Skill Evaluation, and Predictive Performance Analytics
Investment Risk Management, Skill Evaluation, and Predictive Performance Analytics

4 followers
About
AlphaBetaWorks's posts

Post has attachment
Contrary to popular wisdom, 2016 was a satisfactory year for the top institutional stock pickers. They generated approximately 2% from security selection. Regrettably, poor risk management and unintended factor exposures obscured the skills of some strong firms:

Post has attachment

Post has attachment
The widespread obsession with popular hedge fund holdings, which are responsible for just 30% of #HedgeFund crowding, is misguided:

Post has attachment
Smart Beta (returns unexplained by the traditional dumb Market and Sector Betas) accounts for under 8% of monthly variance for most U.S. equity smart beta ETFs:

Post has attachment
Nearly 80% of hedge fund industry’s relative long equity risk (tracking error) is due to systematic factors, not stock-specific bets.

Post has attachment
Information ratios offer a large improvement over simple nominal returns, naive alphas, and Sharpe ratios, but still fall short of the most predictive metrics:

Post has attachment
Sharpe Ratios are almost as dangerous a tool for skill evaluation and fund selection as simple nominal returns:

Post has attachment
Whether by Buffett or someone new, style drift is a cause of Berkshire Hathaway’s increased allocation to technology and the resulting negative alpha.

Post has attachment
The stock-specific losses of the crowded headge fund financials bets in 2015-2016 have been more severe than those in the 2008 crisis. Given this severity, when the cycle turns positive the crowded books are likely to outperform.

Post has attachment
A robust and well-tested technique is especially vital for managing hedge fund exposures:
Wait while more posts are being loaded