We are principally practitioners, which entails a much, much more rigorous approach to risk. Academics love theories, but science isn’t about risk and survival but about what can be proved using a certain set of methods. What cannot be proved is left out. Put the science where it belongs and know the limits of science beforehand. There are many areas where we take decisions where science cannot help, so it is foolish and unscientific to be scientific about these things rather than using precautionary heuristics. Our job is to formalise a set of rules and heuristics with clearly defined things. Before silent risk, nobody tried the Bourbaki-style to formalise risk management by making everything clearly and explicitly defined and stating what can and what cannot be captured by “models” and what a payoff means. Risk is not science, it is not practice, it is not probability, it is not economics, it is not statistics. Risk is risk, a discipline on its own, with its own rigor. As a discipline it is formalisation. Read more
Monthly Archives: June 2016
MSCI – WHAT MATTERS FOR INVESTORS IN THE LONG RUN
Investors who aim to understand what drives returns over the long run might look to the Land of the Midnight Sun.
What are the main sources of return for equity investors who measure their horizon in decades? If you hold securities over the short term, say, for a year, valuation changes matter a lot. But over much longer periods, up to 20 years, the picture changes dramatically, notes Remy Briand, head of research, whose latest post discusses an analysis that MSCI performed on behalf of the Ministry of Finance of Norway.
How share repurchases boost earnings without improving returns
Of all the measures of a company’s performance, its earnings per share (EPS) may be the most visible. It’s quite literally the “bottom line” on a company’s income statement. It’s the number that business journalists focus on more often than any other, and it’s usually the first or second item in any company press release about quarterly or annual performance. It’s also often a key factor in executive compensation.
Investors ‘warming’ to alternative ways of viewing portfolios – survey
Institutional investors may be warming to approaches beyond traditional asset class-based allocation regimes, with many also turning to factor or objective-based alternative investment models, according to a survey commissioned by State Street Global Advisors.
Conducted in the second half of last year, the survey was of senior executives with asset allocation responsibilities at 400 large institutional investors from around the world. It focused on investors’ objectives, their approach to asset allocation and their framework for measuring success.
S&P : Global Aging 2016: 58 Shades Of Gray
S&P Global ratings has recently published its latest Global Aging Report: 58 Shades Of Grey. The study found that in a scenario in which governments took no further measures to plan for aging populations, median net general government debt would rise by 2050 to above 130% of GDP from 43% currently.
The report also includes simulations of long-term sovereign ratings and credit metrics under the following scenarios:
•The “No Policy Change” scenario, in which nations take no further measures to plan for aging populations;
•The “Balanced-Budget” scenario, in which budgetary adjustments result in a balanced budget in 2019 for all sovereigns;
•The “No Aging” scenario, in which government legislation fully contains future increases in age-related spending over the projection period;
•The “Lower Interest Rate” scenario, in which a 2% interest rate prevails over the study period rather than 3% in the no-policy-change scenario.
•The “Higher GDP Growth” scenario, in which GDP growth is increased by 1% across the projection period.
McKinsey report sees disappointing returns
Investment returns in the U.S. and Western Europe over the next 20 years will likely fall short of the returns of the previous 30 years, and investors should scale back their expectations as a result, said a new report from McKinsey Global Institute.
Nasdaq CEO Bob Greifeld: HFT, Blockchain and Exchanges
Bob Greifeld works in an industry where fractions of a second matter. Still, that hasn’t stopped the longtime CEO of Nasdaq from taking a workman-like approach to his job. Dan DeFrancesco talks to Greifeld about his journey to Nasdaq, and what he’s learned along the way. Read more
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