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Risk Management


Where Markets Fail: Markets Are Not Systemic
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Markets are usually not systemic. Instead, from the bird’s-eye perspective of "Capitalism," many businesses are "opportunities" in the same way that it feels good to hit yourself in the head with a hammer: It's much better once you stop.

Progress Interrupted by Populism
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Scarcely any attendees at the 70th CFA Institute Annual Conference thought that the populist tide had peaked and would start subsiding. Panelists Neil Howe, Michala Marcussen, CFA, and Willis Sparks discussed what it meant for global economies.

Book Review: Even the Odds
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A leading analyst and portfolio manager shares her approach to sensible risk taking, which can be applied to anticipating, evaluating, and responding to risks in business, investing, and everyday life.

The Active Equity Renaissance: New Frontiers of Risk
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One modern portfolio theory (MPT) pillar that is unquestionably broken is the use of volatility, specifically standard deviation, as a measure of risk, Jason Voss, CFA, and C. Thomas Howard write in the latest edition of The Active Equity Renaissance series. This initial error in MPT's development is a major contributor to active investment management underperformance.

Shortcuts to Factor Investing: Equities and Beyond
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In the latest installment of his Shortcuts to Factor Investing series, Mark Harrison, CFA, takes a deeper dive into equities and factor investing's wider applications to other asset classes, including fixed income.

Cyber Threats: Can Financial Firms Maneuver Fast Enough?
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As a core part of the critical economic infrastructure, financial firms offer a prime target for adversaries who want to steal data and funds or even to disrupt the industry. Financial firms effectively have fallen behind in a cyber arms race, and the magnitude of risk has vastly increased, with organized crime and state-sponsored attacks becoming more active and powerful. But financial professionals may have a surprising ability to adapt.

Where Markets Fail: Markets Assume Fungibility
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Markets are useful but imperfect, says Jason Voss, CFA. One imperfection is that they assume fungibility. Assuming that a dollar spent on one thing is equivalent to a dollar spent on something else has serious consequences for investors.

Fundamental Indexing in the Bond Market: An Interview with Lidia Bolla, CFA
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Lidia Bolla, CFA, takes the basic model of factor exposure and applies it to the concept of fundamental indexing in the bond market in her new article, "Fundamental Indexing in the Global Bond Markets: The Risk Exposure Explains It All." She discusses her findings in an interview with Ron Rimkus, CFA.

Politics Matters — Sometimes
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Investors need to become experts in the rapid assessment of geopolitical events to be successful in the coming years.

Shortcuts to Factor Investing 101
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If investors have the option to cheaply replicate their desired exposures to help solve their portfolio problems, then why shouldn't they? Mark Harrison, CFA, curates the latest insights on what is meant by smart beta and factor investing and how they differ.