Quant Mashup - Markov Processes Isolating the Monkey Effect [Markov Processes]Continuing our exploration into the smart beta segment (Part 1, Part 2), in this third post we introduce a simple “IQ Test” that can help investors and managers measure the “smartness” of the increasing number of non-cap-weight rules-based products on the market. There are numerous arguments(...) Does Risk Parity Maximize Risk-adjusted Returns? [Markov Processes]While it is well known that risk parity strategies typically allocate more weight or apply leverage to asset classes with lower risk, it is not well understood how higher volatility affects the Sharpe ratios exhibited by the assets that get over- or under- weighted. We find that in practice the(...) Lower Volatility Smart Beta Funds - A Safe Haven in Turbulent Times? [Markov Processes]Smart Beta funds are hot. According to ETF.com, more than half of the 150 funds launched in 2016 implemented smart beta strategies. For the year to June 30, 2016, ETFGI’s most recent data show that assets in smart beta funds have a five-year annual compound growth rate of 31.3 percent. And, low(...)