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Interest rates behaved highly atypically from 2004 to 2006. While the US central bank raised its ... more Interest rates behaved highly atypically from 2004 to 2006. While the US central bank raised its policy rate at every meeting, long-term interest rates remained so remarkably stable that former Fed Chairman Alan Greenspan described their behaviour as a "conundrum". Comparing long-term rates to their theoretical level based on fundamental valuation models, we show that the anomaly was on average 40 bps. Various explanations have been put forward for this, including investors' changed attitude to risk, and the rise in US Treasury purchases by different categories of buyers. We show that, while these variables could theoretically be responsible for the decline in bond risk premiums, they explain less than half of the anomaly when incorporated into a fundamental model of bond yields. However, their recent changing influence could justify their being used for a prospective analysis of bond yields.
Interest Rate Models, Asset Allocation and Quantitative Techniques for Central Banks and Sovereign Wealth Funds, 2010
We study the inflation hedging ability of individua l stocks. While the poor inflation hedging ab... more We study the inflation hedging ability of individua l stocks. While the poor inflation hedging ability of the aggregate stock market has long been documen ted, there is considerable heterogeneity in how individual stock returns covary with inflation. St ocks with good inflation-hedging abilities since 1990 have had higher returns, on average, than stoc ks with low inflation betas and tend to be drawn from the Oil and Gas and Technology sectors. Howev er, we show that the time variation of stock inflation betas is substantial. This makes it diff icult to construct portfolios of stocks that are go od inflation hedges out of sample. This is true for p tfolios constructed on past inflation betas, sect or portfolios, and portfolios constructed from high-pa ying dividend stocks.
The Journal of Portfolio Management, 2012
Interest rates behaved highly atypically from 2004 to 2006. While the US central bank raised its ... more Interest rates behaved highly atypically from 2004 to 2006. While the US central bank raised its policy rate at every meeting, long-term interest rates remained so remarkably stable that Fed Chairman A. Greenspan described their behaviour as a “conundrum.” Comparing long term rates to their theoretical level based on fundamental valuation model, we show that the anomaly was in average 40 bp. Various explanations have been put forward: investors’ changed attitude toward risk, and the rise in US Treasury purchases by different categories of buyers. We show that, if these variables could theoretically be responsible for bond risk premium decline, by incorporating them in a fundamental model of bond rates, they can explain less than half of the anomaly. Their recent changing influence could nevertheless justify their use for prospective analysis of bond rates.
SSRN Electronic Journal, 2010
The Journal of Portfolio Management, 2010
This paper examines the advantages of incorporating strategic exposure to equity volatility into ... more This paper examines the advantages of incorporating strategic exposure to equity volatility into the investment-opportunity set of a long-term equity investor. We consider two standard volatility investments: implied volatility and volatility risk premium strategies. To calibrate and assess the risk/return profile of the portfolio, we present an analytical framework offering pragmatic solutions for long-term investors seeking exposure to volatility. The benefit of volatility exposure for a conventional portfolio is shown through a mean / modified Valueat-Risk portfolio optimization. Pure volatility investment makes it possible to partially hedge downside equity risk, thus reducing the risk profile of the portfolio. Investing in the volatility risk premium substantially increases returns for a given level of risk. A well calibrated combination of the two strategies enhances the absolute and risk-adjusted returns of the portfolio.
Research in International Business and Finance, 2013
Journal of Banking & Finance, 2012
European Financial Management, 2009
SSRN Electronic Journal, 2011
... 2 Amundi (Crédit Agricole and Société Générale Asset Management), 90 bd Pasteur, 75015 Paris,... more ... 2 Amundi (Crédit Agricole and Société Générale Asset Management), 90 bd Pasteur, 75015 Paris, France * Comments can be sent to marie.briere@amundi.com, or ombretta.signori@amundi. com. ... This phenomenon is known as the pass through effect (Belaish (2003), Ca'Zorzi ...
We study the inflation hedging ability of individual stocks. While the poor inflation hedging abi... more We study the inflation hedging ability of individual stocks. While the poor inflation hedging ability of the aggregate stock market has long been documented, there is considerable heterogeneity in how individual stock returns covary with inflation. Stocks with good inflation-hedging abilities since 1990 have had higher returns, on average, than stocks with low inflation betas and tend to be drawn from the Oil and Gas and Technology sectors. However, we show that there is substantial time variation of stock inflation betas. This makes it difficult to construct portfolios of stocks that are good inflation hedges out of sample. This is true for portfolios constructed on past inflation betas, sector portfolios, and portfolios constructed from high-paying dividend stocks.<br><br>Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at <a href="http://www.nber.org/papers/&...
Interest rates behaved highly atypically from 2004 to 2006. While the US central bank raised its ... more Interest rates behaved highly atypically from 2004 to 2006. While the US central bank raised its policy rate at every meeting, long-term interest rates remained so remarkably stable that former Fed Chairman Alan Greenspan described their behaviour as a "conundrum". Comparing long-term rates to their theoretical level based on fundamental valuation models, we show that the anomaly was on average 40 bps. Various explanations have been put forward for this, including investors' changed attitude to risk, and the rise in US Treasury purchases by different categories of buyers. We show that, while these variables could theoretically be responsible for the decline in bond risk premiums, they explain less than half of the anomaly when incorporated into a fundamental model of bond yields. However, their recent changing influence could justify their being used for a prospective analysis of bond yields.
Interest Rate Models, Asset Allocation and Quantitative Techniques for Central Banks and Sovereign Wealth Funds, 2010
We study the inflation hedging ability of individua l stocks. While the poor inflation hedging ab... more We study the inflation hedging ability of individua l stocks. While the poor inflation hedging ability of the aggregate stock market has long been documen ted, there is considerable heterogeneity in how individual stock returns covary with inflation. St ocks with good inflation-hedging abilities since 1990 have had higher returns, on average, than stoc ks with low inflation betas and tend to be drawn from the Oil and Gas and Technology sectors. Howev er, we show that the time variation of stock inflation betas is substantial. This makes it diff icult to construct portfolios of stocks that are go od inflation hedges out of sample. This is true for p tfolios constructed on past inflation betas, sect or portfolios, and portfolios constructed from high-pa ying dividend stocks.
The Journal of Portfolio Management, 2012
Interest rates behaved highly atypically from 2004 to 2006. While the US central bank raised its ... more Interest rates behaved highly atypically from 2004 to 2006. While the US central bank raised its policy rate at every meeting, long-term interest rates remained so remarkably stable that Fed Chairman A. Greenspan described their behaviour as a “conundrum.” Comparing long term rates to their theoretical level based on fundamental valuation model, we show that the anomaly was in average 40 bp. Various explanations have been put forward: investors’ changed attitude toward risk, and the rise in US Treasury purchases by different categories of buyers. We show that, if these variables could theoretically be responsible for bond risk premium decline, by incorporating them in a fundamental model of bond rates, they can explain less than half of the anomaly. Their recent changing influence could nevertheless justify their use for prospective analysis of bond rates.
SSRN Electronic Journal, 2010
The Journal of Portfolio Management, 2010
This paper examines the advantages of incorporating strategic exposure to equity volatility into ... more This paper examines the advantages of incorporating strategic exposure to equity volatility into the investment-opportunity set of a long-term equity investor. We consider two standard volatility investments: implied volatility and volatility risk premium strategies. To calibrate and assess the risk/return profile of the portfolio, we present an analytical framework offering pragmatic solutions for long-term investors seeking exposure to volatility. The benefit of volatility exposure for a conventional portfolio is shown through a mean / modified Valueat-Risk portfolio optimization. Pure volatility investment makes it possible to partially hedge downside equity risk, thus reducing the risk profile of the portfolio. Investing in the volatility risk premium substantially increases returns for a given level of risk. A well calibrated combination of the two strategies enhances the absolute and risk-adjusted returns of the portfolio.
Research in International Business and Finance, 2013
Journal of Banking & Finance, 2012
European Financial Management, 2009
SSRN Electronic Journal, 2011
... 2 Amundi (Crédit Agricole and Société Générale Asset Management), 90 bd Pasteur, 75015 Paris,... more ... 2 Amundi (Crédit Agricole and Société Générale Asset Management), 90 bd Pasteur, 75015 Paris, France * Comments can be sent to marie.briere@amundi.com, or ombretta.signori@amundi. com. ... This phenomenon is known as the pass through effect (Belaish (2003), Ca'Zorzi ...
We study the inflation hedging ability of individual stocks. While the poor inflation hedging abi... more We study the inflation hedging ability of individual stocks. While the poor inflation hedging ability of the aggregate stock market has long been documented, there is considerable heterogeneity in how individual stock returns covary with inflation. Stocks with good inflation-hedging abilities since 1990 have had higher returns, on average, than stocks with low inflation betas and tend to be drawn from the Oil and Gas and Technology sectors. However, we show that there is substantial time variation of stock inflation betas. This makes it difficult to construct portfolios of stocks that are good inflation hedges out of sample. This is true for portfolios constructed on past inflation betas, sector portfolios, and portfolios constructed from high-paying dividend stocks.<br><br>Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at <a href="http://www.nber.org/papers/&...