Tail-Risk Parity: The Quest for a Crash-Proof Portfolio

Michael DePalma By any name—Black Swan, three-standard-deviation event or negative tail event—the risk of unexpected heavy losses is a major concern for investors. The question is how best to protect against these low-probability, high-impact market moves.

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You’re in the Money

Kathleen M. Fisher and Richard L.N. Weaver  Lots of stock options have become valuable in the recent stock market rebound. When should you exercise and when should you sit tight? Systematic planning is required to answer that question.

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Bonds: Born to Be Mild

A 30-year bull market for bonds has come to an end, but this does not make a bear market inevitable, in our view.

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Reducing the Risk from Adding Stock Exposure

Adding other sources of diversification could significantly reduce the risk from increasing stock exposure, our research suggests.

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How Much Risk Does Adding Stocks Pose?

Investors have good reasons for their recent net increase in stock fund purchases—and good reasons to remain anxious, in our view. While market volatility has returned to normal, memories of the wild market swings of the past five years loom large. Here’s what we think about the risk of increasing stock exposure now.

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Is It Time to Get Back into Stocks—or Too Late?

After five years of fleeing stocks for the perceived safety of bonds, US mutual fund investors became net buyers of stock funds in January. While some see the return of the retail investor as a negative indicator for stocks, we say, “Better late than never.”

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In Defense of Commodity Futures

Seth J. Masters and Jon Ruff Several prominent pension funds have slashed their commodity futures investments for delivering poor returns with higher volatility than usual, while failing to diversify equity exposures as expected, The Wall Street Journal recently reported. If inflation rises, they may regret it.

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Ease the Burden of Managing Risk

Risk remains important for many institutional investors, but dealing with it effectively takes time and energy. How investors approach it should therefore depend on their governance capacity.

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Stability Still Matters as Investors Embrace Risk Again

By Kent Hargis (Pictured) and Chris Marx After years of chasing safety at all costs, investors are now reaching for opportunities in long-spurned riskier stocks. But they will still want to safeguard their portfolios against painful market swings in the future.

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How Much Hedge Fund Exposure Makes Sense?

Our research suggests that a well-diversified allocation to hedge funds might improve portfolio returns, but their greatest benefit is the risk reduction that comes from their low correlation to stocks. Here’s why.

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