Systematic Investment Strategies

In the last three decades, a number of investment strategies that capture (some source of) systematic risks have become popular. In some cases, the strategies have also become commonly available in the form of readily accessible investment vehicles (mutual funds, ETFs). Many of these strategies have been researched in detail and have been applied, in different guises, to multiple assets classes with varying degrees of success. Examples of broad categories of such strategies are “carry”, “momentum”, “risk parity”, “hedge fund replication”, “short volatility”, etc. Some of the strategies have become known collectively as ‘alternative beta’ or ‘alternative risk premia’ strategies. In this course, we use a hands-on approach to study some of these strategies: the premises behind them, the various forms in which they have been applied to different markets, the main risks. We focus on strategies which, in one form or another, constitute either self-contained, independent investment approaches or building blocks of more complex investment approaches. We examine the quantitative models through which the strategies have been implemented, and we look at real-world data that have been, or may be, used for their implementation. We focus on the context in which the strategies have been applied and examine the success, or lack thereof, with which they have been employed. When appropriate, we discuss the tradeoffs among the forms in which the strategies have become available for the wider public (efficiency, ease of access).