Financial Modeling

November 4, 2013

The Halloween Effect Revisit 万圣节效应

Historically, stocks tend to outperform in November, stall in December and January, and then resume higher in February and March. Stock markets have seasonal effects and calendar anomalies, which challenge the Efficient Market Hypothesis (EMH). The Halloween effect conveys investors’ belief that the average equity returns of November through April are significantly stronger than the… Continue reading

Behavioral Finance, Financial Modeling, Global Equity, Global Macro, Technical Analysis

Halloween Effect

October 9, 2013

Theory Versus Practice: Rethink Your Portfolio Optimizers

Portfolio optimization is a mathematical process of assigning the proportions of various asset classes or investment styles to be held in a portfolio, in a way as to construct the most efficient portfolio, given the expected rate of returns, expected return dispersion, and some other measures of risk. Portfolio optimization takes place in two stages,… Continue reading

Asset Allocation, Financial Modeling, Portfolio Management, Risk Management

Portfolio Optimization

October 8, 2013

Balancing Risk and Reward: Asset Allocation

The Importance Asset Allocation Many portfolio managers believe that asset allocation is one of the most important decisions that investors make: From a portfolio design standpoint, portfolio theory asserts that in any given period, some investment styles will be outperformers and some will be underperformers, and market goes through cycles. The addition of investment styles… Continue reading

Asset Allocation, Financial Modeling, Portfolio Management, Risk Management, The Endowment Model

October 6, 2013

From Modern Portfolio Theory to Pioneering Portfolio Management: The Endowment Model

Implications of Modern Portfolio Theory Traditional and widely used institutional policy portfolios commonly consisted of a majority of U.S. equities and a reciprocal proportion of U.S. bonds, e.g., 60% stock/40% bond portfolio. The modern portfolio theory (MPT) was developed in the 1950s through the 1970s, particularly, Markowitz 1952, Sharpe 1963, 1964, Ross 1976. Despite all… Continue reading

Alternative Investments, Asset Allocation, Financial Modeling, Portfolio Management, The Endowment Model

July 30, 2013

Earnings Manipulation Detection and The M-Model

Management quality is one of the most important elements in choosing an investment; management is incentivized to hit the target and increase long-term earnings, in reality, this does not necessarily mean long-term value would be created. The first step in any successful public equity investment strategy is to determine whether reported earnings are trustworthy. Benford’s… Continue reading

Financial Modeling, Global Equity, Risk Management

June 22, 2013

Fixed Income Portfolio Attribution Frameworks 固定收益组合绩效归因

Fund managers market their strategy products as that they are able to achieve consistent competitive performance through particular repetitive decision-making process; attribution is an extremely useful tool in verifying their claims to possess these investment skills. Fixed Income Attribution vs. Equity Performance Attribution Equity attribution is standardized – almost all methodologies focus on the value… Continue reading

Financial Modeling, Fixed Income, Portfolio Management

April 19, 2013

Financial Instability Hypothesis, Debt Deflation, and Debt-to-GDP

The debt-to-GDP ratio is one of the indicators of the health of an economy; governments aim for low debt-to-GDP ratios which most likely indicate that they can stand up to the risks from increasing debt levels as they have higher profit margin. Margin Debt Study and Steve Keen Steve Keen, professor in economics and finance… Continue reading

Financial Modeling, Global Macro

February 27, 2013

U.S. Mid Cap Equity Fund Investment Philosophy and Approach (Core, Value, Growth)

In the U.S., mid-capitalization companies are typically defined as those having a market capitalization range of $2 billion to $10 billion. During the period of January 1979 through December 2012, the mid-cap equities as measured by Russell Midcap Index had generated a total return of +5,059%, while the general large caps and small caps had… Continue reading

Financial Modeling, Global Equity, Portfolio Management, Risk Management

January 23, 2013

Alternative Investments in a Portfolio 另类资产在资产配置中的作用

Traditional asset classes such as stocks, bonds, and cash tend to be highly correlated with each other during the down markets. The long-only investments may not meet the changing needs of investors, as a combination of equities and bonds do not provide enough diversification. In a traditional portfolio of stocks and bonds, the major sources… Continue reading

Alternative Investments, Asset Allocation, Financial Modeling, Portfolio Management, Risk Management, The Endowment Model

October 31, 2012

Robert Merton’s Approach for Macrofinancial Risks 罗伯特·默顿的主权信用风险模型

Traditional Macrofinancial framework vs. Robert Merton’s Macrofinancial Framework The traditional approach to measure sovereign credit risk is based upon the assessment of a country’s ability and willingness to service its debt, which takes into account key economic, socio-political, global market, and governance attributes of sovereign entities. Robert C. Merton proposed an alternative approach in this… Continue reading

Financial Modeling, Risk Management

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