Portfolio Risk Management

Style-factor risk premia have been well-documented (and harvested) in the equity world for decades but have proven far more elusive for bonds. The new Axioma Factor-based Fixed Income Model (FFIM) demonstrates that style factors not only do exist in credit, but that they also carry discernible risk premia, which, in turn, can be utilized for systematic, smart-beta investing.

European yields drop, as new infections accelerate; Gilt curve flattens over Brexit and negative rate concerns; Portfolio risk changes little, as less negative correlation offsets lower equity volatility.

Olivier d’Assier discusses modeling the possible outcomes of the election and the potential ramifications of the Biden tax plan on Big Tech. See all the posts from this series: Stress Testing the US Presidential Election: A framework for quantifying market reaction to an unpredictable outcome Presidential Election Stress Test Part II: Biden’s Tax Plan Could […]

In this post, we focus on the Health Care sector. A Trump/Republican win would likely put Obamacare in jeopardy—and that could have a large impact on the earnings of companies in that sector.

US market rises slightly, as risk inches up; Relative riskiness of US Small Caps declines; Industry risk slides in China.

The divergence between our Style and Sector ROOF variants turned into a convergence on the weak side this week as investor’s risk aversion levels surged in the face of rising new infections across major markets hopes for a second fiscal stimulus package in the US before the elections (Nov 3) diminished.

The US market saw an even stronger concentration in stocks recently, with FAANGs (Facebook, Amazon, Apple, Netflix and Google) accounting for 14% of the weight in the STOXX USA 900 on Oct. 9. Add Microsoft to the mix, and the six stocks made up 20% of the US index. Just since July, the aggregate weight of these six stocks increased by one percent in the US index.

Stimulus or lockdowns? US and European yields diverge accordingly; Dollar falls as risk appetites rise; Portfolio risk falls despite higher equity volatility.

In this note, we present updated results for the STOXX USA 500 version of our ROOF Market Portfolios. These portfolios include a Risk-On and a Risk-Off variant built directly from the ROOF Scores and constituents of the STOXX USA 500 benchmark portfolio, and rebalanced monthly (at month-end) using the as-of-then sector ROOF scores and exposures (i.e., no look-ahead bias). We will focus on the last 12 months, as this period had several turnarounds in sentiment.

Stock correlations drive uptick in US risk; Growth takes off worldwide; Airlines still among riskiest global industries.

Investor sentiment continued to diverge between our Style and Sector ROOF variants last week with the latter being more neutral than the former.

The global equity market recovery continued in the third quarter, as benchmark risk slid. But not all components of risk participated in the decline, and volatility remained much higher than it was when the year started.