Oktay Kurbanov

Just released a new paper "Empirical Model of VIX Volatility and SPX Variance" on how one can relate VIX skew with that of SPX skew. https://lnkd.in/ekn_ZqxE

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🖥️ New on Theory Meet Practice: Professor Caroline Flammer from Columbia | SIPA and founding director of the Sustainable Investing Research Initiative (SIRI) discusses the value for investment practitioners of looking beyond the confines of their portfolios: https://lnkd.in/e8fVtaqs Topics of the conversation with the MSCI Sustainability Institute’s Mohammad Umar Ashfaq: —   Unpacking diversity, equity and inclusion, how companies pursue it and its impact on a firm’s financial performance —   The value of applying systems-level thinking to address climate-related financial risk —   Scaling private climate finance for developing countries

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Read this new white paper by my friend and eminent practitioner-scholar Michael Mauboussin, coauthored with Dan Callahan, CFA. The paper explains how to apply valuation multiples like P/E and EV/EBITDA ratio for modern corporations. The message is consistent with my own research--be careful in mechanically using accounting numbers for modern tech companies--their accounting suffers from numerous deficiencies. This paper suggests precautions an analyst must exercise in using numbers and ratios, while offering concrete solutions.

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Two new pieces that I co-authored with MSCI's Fixed Income teams were just published: 1) "A Silver Lining for Climate Tilted Portfolios?" with Juan Sampieri, PhD looked at the emissions of a market-weighted basket of G7 #sovereign bonds versus a #climate-tilted basket. https://lnkd.in/eYkQPcCN 2) "Sovereign Sustainability: How Duration Impacts Returns in Labeled Sovereign Bonds" with Levon Kameryan, which suggests investors may need to have duration in mind when investing in sovereign green bonds. https://lnkd.in/eprPr_76

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With ImpactAlpha our analysts at HIP Investor Inc. have published climate risk and climate resilience analysis on several muni bonds issued in 2023 and 2024, https://lnkd.in/gTrmhvEi #cop29 #climateaction #resilience #futurerisk #munibonds

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How are bank depositors becoming more alert? Yao Zeng, assistant professor of finance at The Wharton School joined Knowledge at Wharton to discuss why depositors have become less “sleepy.” https://lnkd.in/efXwW2HR #Banking #BankDeposit #WhartonFinance #FutureOfFinance #FinanceInnovation

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In advance: 1QTR24 <U/O> Matrix via Applied Indexation is currently available in multi-sheet format.   Featured Clean Tech thematic is derived from a combined Renewables/Diversified Industrials/Technology sector-themed overlay within Invesco’s publicly traded Clean Energy subindustry benchmark proxy ETF (ticker PBW), utilizing the modularity of business segment operations embedded within company revenue lines to generate effective Tier-2: Alpha and Alpha-Beta screens.   >> PBW total return: 3-mos. -17.7%, 1Q24 -21.9%, CY24 -34.9%; YTD24 performance dispersion +27.6%/-66.4% (041924).   >> PBW Fwd adj. PE=26.8 Beta=1.6 versus 24.0/1.5, 23.7/1.5 and 28.8/1.5 sequentially [40.0 limit; N/A totals 62.0% (v. 60.5%) based on portfolio weight and 63.4% of count (+2.6%), 9.8% on market capitalization (-1.3%); Large-cap 15.8% (-3.3%), Mid-cap 38.6% (-3.3%), Small-cap 45.5% (+6.5%)]. >> SPX 12-month Fwd PE=20.6/1Q24 v. 19.2/4Q23, 17.9/3Q23, 18.9/2Q23 (FactSet); CAPE 34.7 from 32.3/29.5/31.1, mean 17.1 (Shiller). <U/O> Matrix via Applied Indexation segments include Wind, Solar, Fuel Cells, Smart Grid, Water, LED, Biofuel, Automotive, Natural Gas, Storage and Aviation plus further classifications detailing component member assignments based on corporate business segment operations (12 segments, 55 classifications, 248 single and multi-listed component members; n=71).   The interrelationships among valuation drivers within cross-asset multi-factor portfolio strategies may best characterize (and link) corporate business segment operations to improve peer group analytics and valuation.   Successful trading strategies (fundamental, index-plus, systematic) and adaptive investable motifs (niche, thematic, megatrend) isolate Value in Growth, and Growth in Value, by aligning the prospective Alpha drivers directly associated with ecosystem composition and supply chain verticals.   At Venn’s intersection, sets and subsets of competing interests endure. The dynamic principles of business segment operations are three-fold: 1) multinational and Large-cap companies function as benchmark sector/industry/subindustry proxies based on scale (Alpha-Beta), 2) Small- and Mid-cap companies participate as competitive peers (Alpha) and, hence, acquisition candidates and 3) among subsets of 1) and 2) are companies provisioning multiple economic sectors, asset classes and geographies.   Please message direct with any questions or for product development considerations; spreadsheet downloads available for research libraries at b-platform Access tab (auto-generated password; PayPal hosted).     www.universalorbit.com   note: w/r/t past-positive forward looking portfolio-based relative quantitative indicators featured in <U/O> Matrix via Applied Indexation, a brief primer is provided online along with <U/O> Tutorial_5: Performance Dispersion (Meta) and slideshow <U/O> Matrix - Establishing Predictive Value: Applied Indexation, Hierarchical Data Sets and Competitive Market Information.

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Zoom in on "repeatable #alpha" and it often looks less impressive up close. An analogy: Roger Federer gave a hell of a commencement address at Dartmouth College several months ago in which he walked through his career #statistics. In sum, he won - 82% of matches, but only - 76% of sets yet only - 58% of games and, shockingly, only - 54% of points. The idea that long term outperformance often is driven by a surprisingly modest positive win-loss ratio is not new. Traders with 55% win rates are heroes. Poker players with 55% win rates are banned from casinos. #quantitative #finance relies on small average wins. Even #fundamental investors get it. A journalist once asked #valueinvesting legend Howard Marks why all his funds were in the top quartile, and he reportedly replied "because we never leave the second quartile." #Replication of pre-fee #hedgefund returns is built on this same principal. Create a #statistical tailwind and watch it play out over time. Reach out if you want to discuss stats. 😎 https://lnkd.in/e3Z45Dnv

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Team, I assure you this is worth the 3min read! We have received such positive feedback about this piece from the advisors we work with! While much of the current conversation is centered around investment portfolios, this paper addresses a vital component of holistic financial planning.

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Kessler recently announced to introduce a sustainability rating for pension funds, based on Mercer’s proprietary Responsible Investment Total Evaluation (RITE) assessment. This tool helps to analyze a portfolio through an environmental, social, and governance (ESG) lens, providing a broader basis for decision-making when selecting pension funds. At the same time, it serves as an ideal starting point for all pension funds to assess and further develop their own sustainable investment strategy. Check out the full article (available in German only) here: https://lnkd.in/dUZnWQT4 #Sustainability #ESG #PensionFund

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Bravo, Corey Hoffstein and Steven Braun of Newfound Research for writing an excellent paper on replication of #cta #hedgefund returns. The big conclusions that build on our research: - Manager skill in managed futures exists but is evenly distributed and lacks persistence; hence, diversify. - Top down replication works as a repeatable, adaptable investment process to capture the drivers of returns of bona fide #hedgefunds. - Fee #alpha is real. Or in hedge fund language, “give me a 400 bps head start and I win 80% of the time.” The paper spends a good deal of time on tracking error. Tracking error to an uninvestable hedge fund index may not be the right question. Isn’t the right question, shouldn’t there be a practical, actionable, investable index that approximates the returns of the space? If only….

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Addressing climate-related challenges across our market footprint requires innovation and investment.   This statement holds true, whether we’re talking about scaling finance for adaptation or developing new carbon credit mechanisms to help facilitate early coal retirement in emerging markets.   I illustrated this point at the Bloomberg Sustainable Finance Forum in New York last month, on a panel moderated by Jon Moore.   “One of the novel ideas that we’re working on at Standard Chartered is the concept of a coal decommissioning credit… which I think will be an unlock in terms of getting the energy transition to move in some markets.”   Read more from this discussion here: https://lnkd.in/dtpZKp2s   #BloombergNEF #innovation #investment #sustainability

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Princeton Endowment, Princo is seeing the "worst environment" for private equity mainly because of the slump in deal-making and liquidity (exits). Princo's investment in private equity at 39.9% is one of the largest allocations, double the average of other large US university endowments, Interestingly, as per Golden, the outgoing CIO - “Large endowments like us are in a much better position than [we] were in 2008,” referring to the global financial crisis when Princo made a 24 percent loss for the year to June 2009 “We all learned our lessons.” https://lnkd.in/g7kTHQv3 #princetonendowment #princeton #privateequity #assetallocation #alternativeassetclasses #alternativeinvesting

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Senior Energy Analyst at Bloomberg Intelligence, Rob Barnett, and Senior ESG Analyst at Bloomberg Intelligence, Rob Du Boff, CFA recently joined me on the The Plantbased Business Hour with Elysabeth Alfano for an in depth conversation on energy and food. One topic we discussed was the connection between the clean energy transition and the food systems transformation that are both needed to combat climate change. Link to the full podcast in the comments. #energy #foodsystemstransformation #climatechange

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Closet Benchmarking Among UK Equity Funds? In the ever-evolving landscape of UK equity funds, it’s important to identify which funds are truly active versus those more aligned with the benchmark. Our latest research, visualized in the scatter chart below, sheds light on where funds fall on this spectrum, with the X-axis showing stock active share and the Y-axis displaying a blend of country and industry-level active share, compared to the FTSE All Share index. We observe a wide spread of results, showing the diversity in fund strategies, from highly independent stock-pickers to those with a more benchmark-aligned approach. We highlight 4 funds with the greatest independence from the benchmark: • Lindsell Train UK Equity • Finsbury Growth & Income Trust • Aviva UK Listed Equity • Castlebay UK Equity What do they have in common? Low to zero allocations to sectors like Energy, Health Care, and Materials - proving their differentiated approach from the FTSE All Share index. However, it's crucial to note that while 'closet benchmarking' can suggest a lack of transparency, that might not be the case here. Many of the funds with lower active shares fall into specific categories, such as ‘tilt,’ ‘enhanced index,’ or ‘beta plus’. These approaches are deliberate and part of a well-defined fund strategy to remain aligned to benchmark indices. In terms of performance, the inset chart shows that high active share funds have outperformed their lower active share peers over time. Since April 2012, high active share funds have returned 164% on average, compared to 131.6% for low active share, 126.2% for medium active share, and 134.5% for the benchmark FTSE All Share ETF. What do you think about active investing with benchmark constraints? Is true independence from the benchmark the key to success, or do defined strategies with low active share still have a place in the market? #UKEquity #ActiveManagement #FundResearch #Investing #PortfolioManagement #assetmanagement #stocks

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Nikolai Roussanov, professor of finance at The Wharton School co-authored the winner of the 2024 Jacobs Levy Center Best Paper prize, which identified common latent risk factors across stocks, bonds, and options. Read about Professor Roussanov's ground-breaking findings on Knowledge at Wharton: https://lnkd.in/etEhRegc #WhartonFinance #RiskFactors #Securities #WhartonResearch

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