reutersforum alpha gb

8/6/2019 ReutersForum Alpha GB

1/15

Reuters ForumThe Quest for Alpha 27 th June 2007


2/15

G abriel BursteinG lobal Head of Asset Management ResearchLipper and Reuters

ALPHAS LONG JOURNEY INTO BETA:

FROM (ONE) ALPHA TO (MANY) BETAS


3/15

3 Reuters Forum The Quest for Alpha

In the beginning it was o ne alpha and o ne m a rk et beta,it felt s o Norm al and s o No bel!

1970s) FamaEMHCAPM,1960s(Sharpe

returnresidualrisk icunsystematticidiosyncra

risk marketsystematic

premiumrisk marketmarket,of returnexcessR stock of returnexcessR

assumptionondistributiNormal

R R

M

s

Ms!


4/15


In the beginning it was o ne alpha and o ne m a rk et beta,it felt s o Norm al and s o No bel!

1970s) FamaEMHCAPM,1960s(Sharpe

returnresidualrisk icunsystematticidiosyncra

risk marketsystematic

premiumrisk marketmarket,of returnexcessR stock of returnexcessR

assumptionondistributiNormal

R R

M

s

Ms!


5/15

5Reuters Forum The Quest for Alpha

then tw o mor e betas ca m e in t o explain theu nexplained

1992)Frenchand(Fama

returnresidual

risk icunsystematticidiosyncrarisk marketsystematic

premiumvalue

market,tobook lowtorelativemarkettobook highof returnR

premiumfactorsizecaps,bigtorelativecapssmallof returnR premiumrisk marketmarket,of returnexcessR

stock of returnexcessR

R R R R

HML

SMB

M

s

SMBSMBHMLHMLMs!


6/15


then a f our th mom ent um technical fact or wasadded

1993)TitmanandJegadeesh1997,(Carhart

factorsrespectivetorespectwithrisk -M,SMB,HML,factortechnicalmomentummarkettoduereturn-UMDR

premiumvalue

market,tobook lowtorelativemarkettobook highof returnHMLR

premiumfactorsizecaps,bigtorelativecapssmallof returnSMBR

premiumrisk marketmarket,of returnexcessMR

stock of returnexcesssR

UMDR MSMBR SMBHMLR HMLMR sR !


7/15


s om e l o st faith in CAPM, 3-fact or , 4-fact or andb u ilt mu lti-fact or mo dels

BARRA)APT,(Ross

iFfactortorespectwithrisk -i

n1,...,i,iFfactortoduereturniFR

stock of returnsR

nFR n

1FR 1sR

!

! ...


8/15


then ca m e the u nc o nceivable sh o c k : Sha r pe, thefathe r o f alpha, d ro pped ou t alpha

a alysis)styleaseet r1992,( ar e

ret r !resi ale lai ea stillast ereyes,-

e c mark iclassassettores ectitrisk -i

1,...,i,i

e c mark iclassassettoeret ri

ret rf m t al

regressioco strai e1...11

1

!

!

! ...


9/15


ju st when we th ou ght hedge f u nds b r ing alpha salvati o n,they we r e r eplicated as alte r native betas

2006)Kat.o,.orga ,J(Gol ma ,

ret rresi ale lai e- iclassassettores ectitrisk -i

1,...,i,iiclassassettoeret re cessi

ret rf e gee cess

!!oregressioco strai e1...

...11

1

!

!

!


10/15


2006 in Eq u ity M u tu al Fu nds :Beta decided the ou tpe r f orm ing invest m ent styles

ompa r ative M utual Fund nde e r f orm ance ippe r B ndices

90

95

100

105

110

115

120

125

1 0

Dec 05 an 06 Fe 06 Mar-06 A pr-06 May-06 J un-06 J ul-06 A ug-06 S ep -06 O ct -06 N ov-06 D ec -06

Inte r nati onal Small/Mid ap or e

S ar ge ap row th


11/15


Alpha-beta diag r a m s 2006 : Eq u ity M u tu al Fu nds

ippe r Eq u ity M u tual Fu nd ndi es an 2006 -De 2006

Alpha-beta diag r am s

-2

0

2

4

6

8

10

12

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6

B en h ma r et ur n

M F

n d e

e t u r n

G O A ARGE CAP

GROWTG O AU TI CAP

COREG O A

U TI CAPGROWTG O A

U TI CAPVA UE

ARGE CAPCORE

ARGE CAPGROWT

ARGE CAPVA UE

S A CAP

CORE

S A CAPGROWT

S A CAPVA UE


12/15


2006 in M u tu al Fu nds : iffe r ent assets, diffe r ent betas, n o t r eally alpha

lo bal M u tu al Fu nd nde e r f or an e: ippe r lo bal ndi es

00

0

0

20

2

0

e 0 an 06 Feb 06 Ma r 06 p r 06 May 06 u n 06 u l 06 ug 06 ep 06 c t 06 ov 06 e c-06

R eal state l o bal

u ity me rg ing Mar ets l o bal

o nd l o bal


13/15


2006 in Hedge Fu nds:id alpha decide the ou tpe r f orm ing st r ategies?

om pa r ati e Hedge Fu nd nde e r f orm ance: r edit u isse r emo nt ndices

0

9

00

0

0

20

2

o 0 ec 0 an 06 Fe 06 M ar 06 pr 06 M a 06 un 06 ul 06 ug 06 ep 06 ct 06 o 06

edicated h or t iasManaged Fu tur es

mer ging Mar ets

ent r i en Multi t r ategies


14/15


2006 Hedge Fu nd Index alpha-beta diag r a m s:its beta again!

Hedge Fu nd t r ateg Indi es2006

alpha-beta diag r a m

-8

-6

-

-2

0

2

6

8

0 0

2 2

6

C I Wo r ld et ur n

H F

t r a

t e g

e

t u r n

/Tremo t e eFu De h s

/Tremo t e eFu D Dstrss

/Tremo t e eFu D lt trt y

/Tremo t e eFu D Rsk Ar

/Tremo t e eFu m kts

/Tremo t e eFu q kt Ntr

/Tremo t e eFu ve t Dr ve

/Tremo t e eFu lo al a

/Tremo t e eFu / h qu ty

/Tremo t e eFu ult trt y

/Tremo t e eFu a a e Futures


15/15


E F F F

Co ncl u si o n:

ALPHA = A FACTORY O F NE BETAS(th rou gh indexati o n, r eplicati o n, de r ivatives)

reutersforum alpha gb

Documents