Worse Returns Research Articles

Downside Risk Analysis Applied to the Hedge Funds Universe

Hedge Funds are considered as one of the portfolio management sectors which shows a fastest growing for the past decade. An optimal Hedge Fund management requires an appropriate risk metrics. The classic CAPM theory and its Ratio Sharpe fail to capture some crucial aspects due to the strong non-Gaussian character of Hedge Funds statistics. A possible way out to this problem while keeping the CAPM simplicity is the so-called Downside Risk analysis. One important benefit lies in distinguishing between good and bad returns, that is: returns greater or lower than investor's goal. We revisit most popular Downside Risk indicators and provide new analytical results on them. We compute these measures by taking the Credit Suisse/Tremont Investable Hedge Fund Index Data and with the Gaussian case as a benchmark. In this way an unusual transversal lecture of the existing Downside Risk measures is provided.

Persistence in Mutual Funds in Latin American Emerging Markets

We find persistence in mutual fund performance both over consecutive time periods and in a multi-period setting. There is significant spread, persisting for at least two or three years, between the portfolio with funds from the top past return quintile and those from the bottom past return quintile. This spread remains unexplained by conventional risk factors. Finally, investors are observed to use information on persistence, since a significant positive relationship is shown to exist between fund flows and past returns, though this is a convex relationship, which is weaker in the region of bad returns.

Editorial: What Do People Do with Advertising? The Critical Question

The authors discuss the nature and importance of the concept of sequence risk, the risk that a bad return occurs at a particularly unfortunate time, such as around the point of maximum accumulation or the start of decumulation. This concept is especially relevant in the context of retirement savings, where the implications for withdrawal rates of a bad return can be particularly severe. They show how the popular “glidepath” or target-date savings products are very exposed to such risk. Three different measures of sequence risk are proposed, each of which is intended to inform investors of the probability that a chosen investment strategy may not deliver desired withdrawal rates, and hence these measures are intended to aid investment choices; conventional performance measures such as Sharpe or Sortino ratios are only indirectly related to this ability to achieve a given withdrawal experience. Finally, the authors note that, using US data, very simple portfolios comprising equities and bonds can achieve very low probabilities of failure to achieve popular desired withdrawal rates, such as 5% a year, as long as the equity component is “smoothed” by switching in and out of cash using a simple trend-following rule. TOPICS:Volatility measures, downside-only measures, performance measurement Key Findings • Sequence of returns risk is particularly important for retirement savings and glidepath or target-date savings are very exposed to it. • Three new measures of sequence risk are proposed to help identify the probability of failing to achieve desired pension savings withdrawal rates. • Simple retirement portfolios where the equity component is smoothed using trend following can reduce sequence risk significantly.

Style Investing and Comovement of Trading Volume

Barberis and Shleifer (2003) model an economy in which some investors engage in positive feedback style investing. These investors group stocks into styles, and then form demands for stocks at style level, instead of at individual stock level. In this paper, the implications of style investing on comovement of trading volume are studied. Stocks are classified into nine styles based on their market cap and book-to-market ratio. We find that stock trading activities tend to comove within styles. Stocks in large market cap styles tend to demonstrate stronger degree of trading activity comovements than stocks in smaller market cap styles. This is consistent with the notion that stocks in large market cap styles tend to belong to major indexes like S&P 500 or Dow Jones 30, and therefore tend to attract more large passive index investors. We also find that the extent to which stock trading activities comove within a style increases with the style's previous year relative return performance. This relation is only statistically significant for medium and small market cap styles. Once again, this could be due to the fact that large market cap stocks are more likely to belong to major indexes. Since investing in these indexes is such a popular investment strategy, it is unlikely that one year of bad return can significantly shake up an investor's faith in investing in these indexes. Our third result is that, when a stock changes its style, its trading activities comove less with stocks in the old style, and comove more with stocks in the new style. All the above results are consistent with the positive-feedback style investing model. Our results cannot be explained by liquidity comovements.

A Note on International Portfolio Diversification with Short Selling

In this paper, the diversification benefits of using stock index futures are examined. Empirical evidence shows that traditional diversification in international equity markets does not produce a risk adjusted performance superior to the US market. An explanation for this result is that restrictions on short selling prohibit the best allocation of resources when overseas stock markets are riskier and have worse returns. However, when such restrictions are eased for short selling in index futures markets, investors are enabled to both allocate their investments more efficiently and to construct a superior portfolio.

Persistence in Unit Trust Performance in New Zealand: Is the Past a Window to the Future?

The efficient market hypothesis states that past performance should not be a predictor of future performance. We test this using a sample of all New Zealand unit trusts in existence from 1987-1998. Almost no evidence of performance persistence is found over this period, suggesting that the efficient market hypothesis does hold within our sample. In the 1997-1998 period, marginal evidence of persistence was found, but none for other periods. We have focused on the top performing unit trusts to establish if it is possible to pick a winning trust based on past performance. Different categories of New Zealand unit trusts are incorporated in this study, and no category appears to have significantly better or worse returns than any others.

The Relationship of Functional Return to Varying Methods of Nerve Repair

This experimental study correlated varying methods of nerve repair with the degree of functional return using the rat sciatic nerve as a model. Six groups of adult male Sprague-Dawley rats (300 to 350 g) had their left sciatic nerve crushed (Group 1), transected and not repaired (Group 6), or transected and repaired using four methods that varied the degree of axonal alignment (Groups 2, 3, 4, and 5). Functional return was evaluated weekly using the sciatic functional index (SFI) and histology. Group 1 (crush) had a significantly better functional return than the other groups (p less than .001). Group 6 (no repair) had a significantly worse functional return than the other groups (p less than .001). Groups 2, 3, 4, and 5, regardless of the precision of axonal alignment, experienced the same degree of functional return (p less than .05). In all groups, with the exception of Group 1 (crush), the degree of functional return was poor. As multiple modifications in conventional microsurgical neurorrhaphy have not resulted in a significant functional improvement, factors not addressed by current techniques apparently compromise clinical results. Further improvement in the results of neurorrhaphy will require modifications in our techniques beyond presently conventional microsurgical methods.

Recovery management in QuickSilver

One price of extensibility and distribution, as implemented in QuickSilver, is a more complicated set of failure modes, and the consequent necessity of dealing with them. In traditional operating systems, services ( e.g. , file, display) are intrinsic pieces of the kernel. Process state is maintained in kernel tables, and the kernel contains explicit cleanup code ( e.g. , to close files, reclaim memory, and get rid of process images after hardware or software failures). QuickSilver, however, is structured according to the client-server model, and as in many systems of its type, system services are implemented by user-level processes that maintain a substantial amount of client process state. Examples of this state are the open files, screen windows, address space, etc., belonging to a process. Failure resilience in such an environment requires that clients and servers be aware of problems involving each other. Examples of the way one would like the system to behave include having files closed and windows removed from the screen when a client terminates, and having clients see bad return codes (rather than hanging) when a file server crashes. This motivates a number of design goals: Properly written programs (especially servers) should be resilient to external process and machine failures, and should be able to recover all resources associated with failed entities. Server processes should contain their own recovery code. The kernel should not make any distinction between system service processes and normal application processes. To avoid the proliferation of ad-hoc recovery mechanisms, there should be a uniform system-wide architecture for recovery management. A client may invoke several independent servers to perform a set of logically related activitites (a unit of work ) that must execute atomically in the presence of failures, that is, either all the related activities should occur or none of them should. The recovery mechanism should support this. In QuickSilver, recovery is based on the database notion of atomic transactions , which are made available as a system service to be used by other, higher-level servers. This allows meeting all the above design goals. Software portability is important in the QuickSilver environment, dictating that transaction-based recovery be accessible to conventional programming languages rather than a special-purpose one such as Argus [Liskov84]. To accommodate servers with diverse recovery demands, the low-level primitives of commit coordination and log recovery are exposed directly rather than building recovery on top of a stable-storage mechanism such as in CPR [Attanasio87] or recoverable objects such as those in Camelot [Spector87] or Clouds [Allchin&McKendry83].

Employment opportunity through tourism

Tourism generating areas provide employment for thousands with the outlook for future growth surpassing all estimates. To create jobs and to increase the influx of tourists, promotion of the sociocultural aspects of tourism are of prime importance. New York in its advertising campaign «I love New York», provided a $ 491 million boom in travel earnings with some $ 60 million added to the state's treasury in taxes. Not a bad return ([5] : 1).