Questioning the Wisdom of Crowds to Design Portfolio Diversification Strategies

IF 0.4 Q4 BUSINESS, FINANCE
Vadim Zlotnikov, Mikhail Stukalo, I. Halperin, Lisa Huang, Cathy Pena
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引用次数: 0

Abstract

For many years, bonds have provided investors in a traditional 60/40 asset mix with a positive carry hedge to equity market volatility and drawdowns. However, with interest rates at historic lows and an evolving inflation backdrop that could impact the negative correlation of stocks and bonds, multi-asset class investors are searching for additional tools to mitigate risk. One novel tool involves creating a long-short portfolio of uncrowded assets. In particular, crowding in stocks held by asset managers has a significant impact on stock performance. Crowded assets and strategies result in outperformance during trending markets but exhibit significant drawdowns and failures of diversification during spikes in volatility. Crowded stocks are expected to deliver negatively skewed market-adjusted returns and higher forward volatility once the market players give up on crowded trades. Conversely, uncrowded assets have the potential for positive skewness and long vol-like behavior. This article computes a stock-level crowding measure based on active bets by mutual and hedge funds. We construct a long-short equity portfolio based on a combination of a pure holdings-based crowding measure that is long volatility, has minimal equity beta, is not persistently correlated with common risk factors (style), and has a negative correlation to the most crowded stocks. We show how this long-short equity portfolio can be combined with a traditional 60/40 portfolio in order to provide better structural diversification.
质疑设计投资组合多样化策略的群体智慧
多年来,债券为传统60/40资产组合的投资者提供了对股市波动和提款的正向套利对冲。然而,随着利率处于历史低位,通货膨胀背景不断演变,可能会影响股票和债券的负相关性,多资产类别投资者正在寻找其他工具来降低风险。一个新颖的工具涉及创建一个由未拥挤资产组成的长短投资组合。特别是,资产管理公司持有的股票拥挤对股票表现有重大影响。拥挤的资产和策略在趋势市场中表现出色,但在波动性飙升期间表现出显著的缩水和多元化失败。一旦市场参与者放弃拥挤的交易,拥挤的股票预计将带来负面的市场调整回报和更高的远期波动性。相反,未拥挤的资产有可能出现正偏态和长体积行为。本文基于共同基金和对冲基金的主动押注计算股票水平拥挤度。我们构建了一个长短期股票投资组合,该投资组合基于纯粹的基于持股的拥挤度量,该拥挤度量是长期波动性的,具有最小的股票贝塔系数,与常见风险因素(风格)不持久相关,并且与最拥挤的股票呈负相关。我们展示了这种长短期股票投资组合如何与传统的60/40投资组合相结合,以提供更好的结构多元化。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
CiteScore
1.50
自引率
14.30%
发文量
40
期刊介绍: The Journal of Alternative Investments (JAI) provides you with cutting-edge research and expert analysis on managing investments in hedge funds, private equity, distressed debt, commodities and futures, energy, funds of funds, and other nontraditional assets. JAI is the official publication of the Chartered Alternative Investment Analyst Association (CAIA®). JAI provides you with challenging ideas and practical tools to: •Profit from the growth of hedge funds and alternatives •Determine the optimal mix of traditional and alternative investments •Measure and track portfolio performance •Manage your alternative investment portfolio with proven risk management practices
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