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Investor Profile

Risks are multi-faceted and evolving: Litterman

If Robert Litterman were a CIO of a public pension plan he would not try to hit an “unrealistic return target”. Amanda White speaks to him about risk, quants, asset allocation and climate change. There is a serious problem with US public pension funds and the “unrealistic commitments and unrealistic return targets” they have set, […]

How to estimate the equity risk premium

Given the importance of equity risk premium, it is surprising how haphazard the estimation of equity risk premiums remains in practice. This paper by Aswath Damodaran at the New York University Stern School of Business examines a number of different approaches to determining the equity risk premium and why different approaches yield different values. It […]

Persistently high equity risk premium unprecedented

This paper by the Federal Reserve Bank of New York looks at the equity risk premium information from 20 models and estimates the ERP for various time periods. Extraordinarily it finds that the (preferred) estimator places the one-year equity premium in July 2013 at 14.5 percent, the highest level in 50 years and well above the […]
Investor Profile

The real star of Washington State

Renowned academic Ashby Monk said the best way to lure talent to US public sector retirement funds unable to pay Wall Street salaries was to hire the green, the grey or the grounded. With a 30-year career spanning business, government and media, Theresa Whitmarsh, executive director of the $92.1-billion Washington State Investment Board (WSIB) laughs […]

Short-term consequences of long-term risk

Estimates of the equity risk premium suggest higher levels of uncertainty in equities markets, despite the fact daily VIX risk levels have declined. Risk managers need to confront the tension between short-term risk levels and long-term macroeconomic uncertainties. This MSCI research prescribes the need for risk managers and investors to make fuller use of a […]