Overview of Quantitative Research · 2018. 6. 7. · Quantitative Research in Investing: Exploit...
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Overview of Quantitative Research www.alliancebernstein.com
Transcript of Overview of Quantitative Research · 2018. 6. 7. · Quantitative Research in Investing: Exploit...
Overview of Quantitative Research
www.alliancebernstein.com
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An investment firm admired for the quality of its research and its ability to turn knowledge into
results for clients
AllianceBernstein is …
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“We don’t control the world, we just try to out-think it.”
Sanford C. Bernstein
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Our Culture
Clients first, always
Unimpeachable integrity
Meritocracy
Drive towards individual achievement and team success
Respect and collaboration
Highest ethics
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Our Research Focus
Our company’s DNA is research
Our research footprint is extraordinary
Insights are brought together globally in an integrated fashion
We can amplify and/or isolate these insights in client portfolios
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Quantitative Research in Investing: Exploit Biases in Human Behavior
Behavioral Finance says that not all investors are rational
Quantitative Research can exploit these behavioral biases through an unemotional, objective and systematic framework
InvestmentControversy
Which?
Long-TermEarnings Power
Over-reactionTo Investment Controversy
Which?
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Door A Door B
80%Chance of
Getting$4,000
100%Chance of
Getting$3,000
Source: Kahneman and Tversky
Certainty Premium: “A Bird in Hand is Worth Two in the Bush”
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Door A Door B
80%Chance of
Getting$4,000
100%Chance of
Getting$3,000
Source: Kahneman and Tversky
Given the Possibility of Gains, Which Would You Rather Choose?
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Given the Possibility of Gains, Which Would You Rather Choose?
A B
0%0%
A. Door A
B. Door B
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Certainty Premium: Lowers Risk Premiums and Elevates Prices
Door A Door B
Source: Kahneman and Tversky
ExpectedValue$3,200
ExpectedValue$3,000
80%Chance of
Getting$4,000
100%Chance of
Getting$3,000
20%
80%
Popularity Popularity
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Source: Kahneman and Tversky
Door A Door B
80%Chance of
Losing$4,000
100%Chance of
Losing$3,000
Certain Gain Becomes Certain Loss
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Source: Kahneman and Tversky
Door A Door B
80%Chance of
Losing$4,000
100%Chance of
Losing$3,000
Given the Possibility of Losses, Which Would You Rather Choose?
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Given the Possibility of Losses, Which Would You Rather Choose?
A B
0%0%
A. Door A
B. Door B
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Source: Kahneman and Tversky
Door A Door B
ExpectedValue
$(3,200)
ExpectedValue
$(3,000)
80%Chance of
Losing$4,000
100%Chance of
Losing$3,000
92%
8%
Popularity Popularity
People Gamble to Avoid Loss
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Quantitative Research in Investing: Provide Systematic Framework
Systematic framework to evaluate companies
Incorporate risk issues and cost considerations
Trade-off return and risk in an optimized framework
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Quantitative Research in Practice: Markowitz’s Mean-Variance Framework
An investor allocates his wealth by solving the portfolio optimization problem:
where
: portfolio weights
: vector of expected returns
: covariance matrix returns
: risk tolerance coefficient
: constraints (budget constraint, sectors/industry, etc.
Risk
Return Efficient Frontier
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Opportunities in Research
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Sanford C. Bernstein(Sell-Side)
Alternative Investments
Blend Strategies
DefinedContribution
FixedIncome
Growth Equities
ValueEquities
Buy-side Businesses
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What We Look for in Candidates
Demonstrated academic and professional success
A passion for learning
Critical thinking and intellectual curiosity
Creativity in applying quantitative techniques
Ability to focus on key issues to drive towards decisions
Collaborative and open-minded
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More Information
www.alliancebernstein.com
www.alliancebernstein.com/careers
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Our Competitive Advantages
Commitment to research
Globally integrated research
Fundamental and Quantitative research
Having More Knowledge
Using Knowledge Better
Making Clients More SecureLong-term superior performance
Unwavering client focus
Experienced and stable teams
Disciplined investment process
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