Objective research to aid investing decisions
Value Allocations for June 2019 (Final)
Momentum Allocations for June 2019 (Final)
1st ETF 2nd ETF 3rd ETF

Categorization of Risk Premiums

Posted in Big Ideas, Momentum Investing, Size Effect, Value Premium, Volatility Effects

What is the best way to think about reliabilities and risks of various anomaly premiums commonly that investors believe to be available for exploitation? In their December 2017 paper entitled "A Framework for Risk Premia Investing", Kari Vatanen and Antti Suhonen present a framework for categorizing widely accepted anomaly premiums to facilitate construction of balanced investment strategies. They first categorize each premium as fundamental, behavioral or structural based on its robustness as indicated by clarity, economic rationale and capacity. They then designate each premium in each category as either defensive or offensive depending on whether it is feasible as long-only or requires short-selling and leverage, and on its return skewness and tail risk. Based on expected robustness and riskiness of selected premiums as described in the body of research, they conclude that:

Please or subscribe to continue reading...
Gain access to hundreds of premium articles, our momentum strategy, full RSS feeds, and more!  Learn more

Daily Email Updates
Research Categories
Recent Research
Popular Posts