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By Beverly Chandler, Opalesque London:
A new study from the EDHEC-Risk Institute, produced as part of the Amundi ETF research chair on "Core-Satellite and ETF Investment," has found that appropriate use of the Dynamic Core-Satellite approach can boost returns while controlling risk.
The study, Capturing the Market, Value, or Momentum Premium with Downside Risk Control: Dynamic Allocation Strategies with Exchange-Traded Funds, looked at dynamic risk budgeting methodologies such as Dynamic Core-Satellite strategies, designed to provide risk-controlled exposure to different asset classes. The study says: "There is extensive evidence that investment strategies based on momentum and value are attractive for portfolio managers who seek outperformance. Momentum and value are among the most robust return drivers in the cross section of expected returns."
The researchers, Elie Charbit, Jean-René Giraud, Felix Goltz and Lin Tan, examined how to exploit the value and momentum anomalies using a Dynamic Core-Satellite investment model and used ETFs, that offer both liquidity and a broad exposure to the markets to implement portfolio strategies.
Having analysed the performance
of risk-controlled dynamic asset allocation
strategies, the researcher also looked at exposure to
broad equity indices and exposure
to the value and momentum strategies. They found that these investment strategies
alone could achieve higher returns but
were exposed to high extreme risk because
they c...................... To view our full article Click here
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