Dynamic Portfolio Management and Market Anomalies (Presentation Slides)

Abstract

We discuss performance of some known market anomalies like equal-weighted index, low volatility stock index, factor anomalies of Andrea Frazzini, Ronen Israel and Tobias J. Moskowitz. We suggest the utilization of these anomalies through dynamic risk allocation in portfolios based on these anomalies creating desired final fund value distribution. We introduce the notion of Dynamic Leverage as a VAR extending risk measure taking into account the investment time horizon. We introduce a modification of Black-Jones-Perold portfolio insurance. For an investment fund with dynamically controlled risk exposure and certain risk inertia, we demonstrate the existence of a critical NAV level below which the efficacy of de-leveraging is compromised.