How Generic is value?

Bernd Scherer and Stephan Kessler

We document the impact of alternative design choices for creating long/short value factor return series (strategies) on their risk adjusted returns. Using alternative parameter selections the extent of the difference in results outline that value cannot be defined by a singular value factor but needs to be understood as a broad concept. Next we derive the impact of design choices on critical t-value to protect against false discoveries and guide research governance. We find that statistical procedures that have been designed to mitigate the impact of data mining can help us to ex ante identify a set of design choices that will continue to perform better out of sample. Our research joins the list of papers that are critical of presenting “the” single best design choice without displaying the many design choices (research routes) that have been tested in the process of conducting research.

Quant in emerging markets

Claire Jones

There are fewer quant funds working in the Emerging Markets than in the Developed Markets and traditional quant signals appear to have greater power there, which suggests there may be more opportunities for quant investors. However, EM investors also face much larger trading costs. We examine whether smart beta strategies work better in this region after considering trading costs.

Performance metrics meanings and interpretations in asset management by managers, consultants, funds and trustees

Dori Levanoni

Asset managers are judged by allocators (pension funds, etc.) and advisors (consultants, OCIO, etc.) based on various performance metrics (sharpe ratio, drawdowns, etc.). What do they think that really tells them about managers? What do managers think it tells them about us?

Phantom of the Opera: ETFs and Shareholder Voting – winner of 4 Nations Cup at HEC

Oguzhan Karakas

The short-selling of exchange-traded funds (ETFs) creates “phantom” ETF shares with cash flows rights but no associated voting rights. Both regular and phantom ETF shares trade at ETF market prices. However, while regular shares are backed by the underlying securities of the ETF and voted as directed by the sponsor, phantom shares are backed by collateral that is not voted. Introducing a novel measure of phantom shares both of the ETF and corresponding underlying securities, we find that increases in phantom shares are associated with (i) decreases in number of proxy votes cast (for and against), (ii) increases in broker non-votes, and (iii) increases in the vote premium over the voting record date for important votes for the underlying stocks of the ETF. Consistent with poor governance, firms with the highest proportion of phantom shares underperform.

The current rates environment, the yield curve and the sensitivities of the value factor

Thomas Maloney