Rand Kwong Yew Low

BlackRock

We examine the use of elliptical and asymmetric copula models to forecast returns for portfolios of 3 to 12 assets for an investor who has no short-sales constraints and a utility function characterized by the minimization of Conditional Value-at-Risk (CVaR). We examine the efficient frontiers produced by each model and focus on comparing two metho...

We examine and compare the performance of three different pairs trading strategies (the distance cointegration, and copula methods) on the US equity market from 1962 to 2014 using a time-varying series of trading costs. Using various performance measures, we conclude that cointegration strategy performs as well as the distance method. However, the...

Why do mean-variance (MV) models perform so poorly? In searching for an answer to this question, we estimate expected returns by sampling from a multivariate probability model that explicitly incorporates distributional asymmetries. Specifically, our empirical analysis shows that an application of copulas using marginal models that incorporate dyna...

Asymmetric dependence in equities markets have been shown to have detrimental effects on portfolio diversification as assets within the portfolio exhibit greater correlations during market downturns compared to market upturns. By applying the Clayton canonical vine copula (CVC) to model asymmetric dependence, we produce a measure of systemic risk a...

Our study lies at the intersection of the literature on the diversification benefits of commodity futures and the literature on style integration. It augments the traditional asset mix of investors with a long-short portfolio that integrates the styles that matter to the pricing of commodity futures. Treating the style-integrated portfolio of commo...

The commodity pricing literature advocates the design of long-short portfolios based on equal weights. Relaxing the assumption of naive diversification, this article studies the benefits of applying sophisticated weighting schemes to the construction of long-short momentum and term structure portfolios. Weighting schemes based on risk minimization...

Regulators need a method that is versatile, is easy to use and can handle complex path models with latent (not directly observable) variables. In a first application of partial least squares structural equation modeling (PLS-SEM) in financial stress testing, we demonstrate how PLS-SEM can be used to explain the transmission of systemic risk. We mod...

We evaluate the extent to which sell-side equity analysts can facilitate market efficiency when there is increasing uncertainty about a stock’s future value. The prevalence of the 52-week-high momentum anomaly, which can be largely attributed to information uncertainty, provides a setting for examining the value and timing of analysts’ earnings for...

Shadow banking (SB) makes a significant contribution to financing the real economy and is intricately connected with the regulated banking sector (RBS). This article illustrates how transmission of systemic risk from SB to RBS can be modelled in order to enable regulators better manage contagion. After an extensive literature review of articles fro...

We perform an extensive and robust study of the performance of three different pairs trading strategies - the distance, cointegration, and copula methods - on the entire US equity market from 1962 to 2014 with time-varying trading costs. For the cointegration and copula methods, we design a computationally efficient 2-step pairs trading strategy. I...