Improving the Investment Process with a Custom Risk Model: A Case Study with the GLER Model

Earnings forecasting in a global stock selection model and efficient portfolio construction and management

“…The empirical results in a test-bed of real-life active portfolios based on client data show clearly that the above-mentioned unknown systematic risk is a significant portion of the overall systematic risk, and should be addressed accordingly. Sivaramakrishnan and Stubbs (2013) proposed the creation of a custom risk model by combing the factors used in both the expected-return and risk models, which does not address the factor alignment problem that is due to constraints. Saxena and Stubbs (2012) proposed that the risk variance-covariance matrix C be augmented with additional auxiliary factors in order to complete the risk model.…”

News volume information: Beyond earnings forecasting in a global stock selection model

“…One can estimate global composite models of expected returns using earnings expectations data, price momentum variables, and reported financial data (Guerard, Rachev, & Shao, 2013;Sivaramakrishnan & Stubbs, 2013). In a follow-up analysis to the global composite model analysis, Guerard, Markowitz, and Xu (forthcoming) reported the importance of including an earnings forecasting variable in a global portfolio.…”