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Over 25 years of applied quantitative innovation

Low-volatility | Factor | Momentum | Emerging | Developed | Duration | Value | Active vs passive
2015 | 20142013 | 2012 | Older

Quant research library

As a thought leader in quantitative research, Robeco has an extensive collection of internally-generated and frequently-cited investment research. Our internal library contains insightful papers covering a wide range of quant topics.

The quality of low-risk credits

14-09-2016 | Research | Frederik Muskens, Jeroen van Zundert, Mark Whirdy, Patrick Houweling, PhD

Recently a new factor was added to the literature: Quality. In credits, we see Quality as a natural extension of pure Low-Risk. All our credit factor models have used Quality since inception, and have expanded its use over the years.

Honey, how much did you say you paid for these low-vol stocks?

12-09-2016 | Research | Maarten Polfliet, Pim van Vliet, PhD

Investors are worried about the high valuations of stocks in general and low-volatility stocks in particular. And so are we! In relative terms, low-volatility stocks have become more expensive during the last two years, but it’s not the first time. It happened first in 2008 and again in 2011.

Integrating sustainability into factor credit strategies

12-07-2016 | Research | Frederik Muskens, Jeroen van Zundert, Mark Whirdy, Patrick Houweling, PhD

Our factor credit strategies have two main objectives: maximizing the portfolio’s factor exposure and limiting sustainability risks. How do we integrate these two goals?

Factor Investing with smart beta indices

06-07-2016 | Research | David Blitz, PhD

Smart beta indices are a popular way of implementing a factor investing strategy. However, research suggests that this may not the best way, as the factor exposure provided by popular smart beta strategies varies greatly and they do not unlock the full potential of factor premiums.

Conservative Equities in historical perspective: Investment behavior since 1602

18-04-2016 | Research | Jan Sytze Mosselaar, Pim van Vliet, PhD

Since the birth of the modern stock market in 1602, the pendulum of the investment culture has moved from a return focus to a risk focus and back.

Factor Investing in the Corporate Bond Market

11-12-2015 | Research | Jeroen van Zundert, Patrick Houweling, PhD

We provide empirical evidence that the Size, Low-Risk, Value and Momentum factors have significant risk-adjusted returns in the corporate bond market. By combining these factors in a multi-factor portfolio, drawdowns and tracking error vs. the market are reduced, while the higher return and Sharpe ratio are preserved.

Is value trapped?

04-12-2015 | Research | David Blitz, PhD

The poor long-term live performance of the first generation of value indices indicates that capturing the value premium is not easy. This does not mean, however, that the value premium is beyond the reach of investors. We argue that a value premium still exists, but that harvesting it requires an approach that is much more sophisticated than simply following a straightforward value index.

The beauty and the beast of value and momentum investing

22-07-2015 | Research | David Blitz, PhD

We usually focus on how to make a good investment strategy even better, but in recent research we looked at how to make it worse.

Is rebalancing the source of factor premiums?

12-02-2015 | Research | David Blitz, PhD

Some argue that the mere mechanism of rebalancing increases returns, and that this explains the success of factor investment strategies. Although factor strategies do need rebalancing to maintain their exposures, there are several reasons why it is unlikely that this is their source of added value.

Robeco quant EM equities outperforms generic factor indices

19-01-2015 | Research | David Blitz, PhD, Wilma de Groot, CFA

We have compared the realized performance of our quantitative emerging markets equities (QEME) strategies with the hypothetical performance of recently launched generic factor indices.

Risk Parity versus Mean-Variance: It’s all in the Views

19-12-2014 | Research | Winfried Hallerbach, PhD

The key problem in portfolio optimization is not per se the optimization itself, but the specification of the inputs, notably the views on ex-ante risk premia.

Short-term stock selection model boosts performance Enhanced Indexing

11-12-2014 | Research | Michael Strating, Weili Zhou, CFA, Wilma de Groot, CFA

Robeco Enhanced Indexing invests in global developed markets equities, and has a low tracking error against its benchmark, the MSCI World index. In recent years, performance has been strong. In this article we focus on one element that distinguishes Robeco’s strategy from those of others: our short-term stock selection model (SHOT).

Low-volatility investing: Expect the unexpected

06-11-2014 | Research | David Blitz, PhD, Pim van Vliet, PhD

Low-volatility stocks are known to lag in rising markets and lose less in falling markets. On average this is true, but is it always the case? Examining the historical evidence we find that unlikely scenarios – both positive and negative - do occur once in a while. Low-volatility investors should therefore not only focus on averages, but consider a broader range of possible outcomes.

Core and Active Quant Emerging Markets: the importance of research

29-10-2014 | Research | Wilma de Groot, CFA

Robeco portfolio manager Wilma de Groot explains the importance of research and discusses two major new projects in her department. “ESG inclusion can be seen as a form of risk reduction”, she says.

What drives the value premium?

16-10-2014 | Research | David Blitz, PhD

The empirical evidence for the presence of a value premium in stock markets is overwhelming. But why does this phenomenon exist? A new white paper examines a popular explanation.

When factors disagree

30-09-2014 | Research | Bart Van der Grient, David Blitz, PhD, Pim van Vliet, PhD

Generic strategies designed to harvest a certain factor premium regularly conflict with other factor premiums. We find that the premiums associated with these strategies tend to shrink, sometimes even to zero, in these periods of factor disagreement. But enhanced factor strategies avoid stocks that are unattractive on other established factors and continue to deliver when generic factor strategies struggle.

Efficient factor investing strategies - A ‘Sharper’ approach to harvesting factor premiums

27-08-2014 | Research | David Blitz, PhD, Joop Huij, PhD

There is a shift towards allocating to the factor premiums momentum, value and low volatility. However, since common factor indexes are a suboptimal way to harvest factor premiums, this paper shows the improved results of a more sophisticated approach. Factor strategies developed by Robeco lead to higher returns, while lowering the risks, resulting in higher Sharpe ratios.

Duration model performs well in times of large yield changes

24-07-2014 | Research | Johan Duyvesteyn, PhD, CFA, Martin Martens, PhD, Olaf Penninga

Robeco’s quantitative duration model drives the performance of quant duration solutions such as Robeco Lux-o-rente and Robeco Flex-o-rente. We monitor the performance of the model and regularly investigate in which circumstances the model performs well and which conditions are more challenging.

15 Years of Quantitative Emerging Markets Research

13-06-2014 | Research | Wilma de Groot, CFA

In 1999, fifteen years ago, Robeco found that quantitative stock selection techniques known to be effective in developed markets are also able to deliver superior investment results in emerging markets. What are the biggest takeaways from the research done and how does the model work in practice?

How Smart is 'Smart Beta' Investing?

05-06-2014 | Research | David Blitz, PhD

Investors increasingly embrace “smart beta” investing, by which we mean passively following an index in which stock weights are not proportional to their market capitalizations, but based on some alternative weighting scheme. Examples include fundamentally-weighted indices and minimum-volatility indices. In this whitepaper we first take a critical look at the pros and cons of smart beta investing in general. After this we successively discuss the most popular types of smart indices that have been introduced in recent years.

How to combine factors in the duration model?

26-07-2013 | Research | Johan Duyvesteyn, PhD, CFA, Martin Martens, PhD, Olaf Penninga

The duration model combines multiple factors. The model is used to predict government bond returns and fully determines the active positions in the funds Robeco Lux-o-rente, Robeco Flex-o-rente and Robeco Emerging Lux-o-rente.The performance of the model is continuously monitored and analyzed to strive for further enhancements. This whitepaper discusses the impact of an enhanced approach on the balance and the robustness of the model.

Strategic Allocation to Commodity Factor Premiums

18-07-2013 | Research | David Blitz, PhD, Wilma de Groot, CFA

Commodities have become less popular for investors. They are wondering if the traditional arguments for investing in commodities – like diversification- still apply. This paper explores a better way to invest: by setting up a commodity factor portfolio

Surprising results of lower volatility equities in emerging markets

01-05-2013 | Research | David Blitz, PhD, Pim van Vliet, PhD

Emerging markets have become increasingly important to equity investors due to their fast growing economies. But what is the relationship between risk and return in these markets? Answer: it is flat or even negative. Empirical results show that the volatility effect - long-term equity returns at distinctly lower downside risk - is significant, robust and distinct.

Residual Equity Momentum for Corporate Bonds

17-08-2012 | Research | Daniël Haesen, CFA, Jeroen van Zundert, Patrick Houweling, PhD

Residual Equity Momentum for Corporate Bonds

Enhancing a low-volatility strategy is particularly helpful when generic low volatility is expensive

01-06-2012 | Research | Pim van Vliet, PhD

An enhanced low-volatility strategy, which also provides exposure to valuation and sentiment factors, can improve returns by up to 6% a year.

On the nature and predictability of corporate bond returns

16-05-2012 | Research | Daniël Haesen, CFA, Patrick Houweling, PhD

Corporate bond returns consist of two distinct components: an interest rate component, which is default-free and anti-cyclical, and a credit spread component, which is default-risky and pro-cyclical.

The mythical risk premium

16-05-2012 | Research | Eric Falkenstein, Ph.D

“The higher the risk, the more deluded the investors,” according to Eric Falkenstein, PhD, speaking at the Robeco 2012 Low-Volatility Investing seminar.

The low-risk anomaly in credits

01-04-2012 | Research | Daniël Haesen, CFA, Patrick Houweling, PhD, Paul Beekhuizen, Peter Kwaak, Renxuan Wang, Sander Bus, Victor Verberk

In this Research Note we show that low-risk credits had superior risk-adjusted excess returns over the past 20 years.1 By selecting low-risk bonds from low-risk issuers, investors would have earned credit-like returns at substantially lower risk.

A proof of the optimality of volatility weighting over time

20-02-2012 | Research | Winfried Hallerbach, PhD

We provide a proof that volatility weighting over time increases the Sharpe or Information Ratio. The higher the degree of volatility smoothing achieved by volatility weighting, the higher the risk-adjusted performance

Another look at the performance of actively managed equity mutual funds

14-02-2012 | Research | David Blitz, PhD, Joop Huij, PhD

In this study we evaluate the performance of actively managed equity mutual funds against a set of passively managed index funds.

Low-volatility investing: a long-term perspective

16-01-2012 | Research | Pim van Vliet, PhD

The volatility effect is present in US stock returns in every decade from 1931-2009. During these decades, low-volatility stocks produced a positive absolute return, with lower risk than the market-capitalization-weighted index.

Ibbotson's default premium: risky data

09-12-2011 | Research | Patrick Houweling, PhD, Winfried Hallerbach, PhD

Ibbotson’s “Stocks, Bonds, Bills and Inflation” data set is widely used because it provides monthly US financial data series going back to as early as 1926. In this data set, the “default premium” is calculated as the difference between the total returns on long-term corporate bonds and long-term government bonds.

Taking biases out of earnings revisions

08-10-2011 | Research | Joop Huij, PhD

New research from Robeco identifies and corrects for biases in analyst earnings revisions, says Senior Quantitative Equities Researcher, Joop Huij.

Short-term residual reversal

17-08-2011 | Research | David Blitz, PhD, Joop Huij, PhD, Marno Verbeek, Simon D. Lansdorp

A short-term reversal strategy based on residual momentum reduces exposure to systematic factors and results in lower risk and better returns than a conventional momentum strategy.

How to benchmark low-volatility strategies

14-07-2011 | Research | David Blitz, PhD, Pim van Vliet, PhD

What is the best way to measure the performance of a strategy focused on risk-adjusted return? David Blitz and Pim van Vliet answer this question in their article, Benchmarking Low-Volatility Strategies, published in the Journal of Index Investing.

Strategic allocation to premiums in the equity market

01-07-2011 | Research | David Blitz, PhD

An optimal portfolio allocation will have large exposures to value, momentum and low-volatility strategies, according to a study of US equity returns over 40 years.

Another look at trading costs and short-term reversal profits

01-07-2011 | Research | Joop Huij, PhD, Weili Zhou, CFA, Wilma de Groot, CFA

Several studies report that abnormal returns associated with short-term reversal investment strategies diminish once transaction costs are taken into account.

Duration Model in periods of rising inflation

01-07-2011 | Research | Johan Duyvesteyn, PhD, CFA, Martin Martens, PhD, Olaf Penninga

We analyzed the sensitivity of the duration model's performance to inflation and different financial market regimes. Our conclusions are threefold: (1) the model delivers a strong performance when inflation is high; (2) the model offers protection against rising inflation for bond investors and (3) the model is successful in both bull and bear markets.

Is the value premium really compensation for distress risk?

13-05-2011 | Research | Joop Huij, PhD, Wilma de Groot, CFA

This comprehensive investigation of the relation between the value anomaly and distress risk finds that value stocks are not cheaper than growth stocks due to the risk of financial distress.

Is the value premium really compensation for distress risk?

13-05-2011 | Research | Joop Huij, PhD, Wilma de Groot, CFA

This comprehensive investigation of the relation between the value anomaly and distress risk finds that value stocks are not cheaper than growth stocks due to the risk of financial distress. While the study looked at US stock returns, the research applies to emerging markets as well.

Evaluating the performance of global emerging markets equity exchange-traded funds

08-02-2011 | Research | David Blitz, PhD, Joop Huij, PhD

Emerging markets ETFs typically underperform benchmarks by 1% a year and about half of the funds exhibit high tracking errors. With these characteristics, should they be classified as passive strategies?

Low risk stocks highly suitable for long-term investors

15-01-2011 | Research | Pim van Vliet, PhD

A decentralized professional investment process can lead to inefficient portfolios. Low-risk equities are undervalued because active managers have a dual incentive to buy high-risk stocks.

ESG integration into Robeco’s quantitative stock selection model

03-01-2011 | Research | Daniël Haesen, CFA, Michael Strating

Robeco advocates Responsible Investing. We believe that this improves the long-term risk-return profile for our clients. One of the pillars of Robeco’s Responsible Investing policy involves the integration of environmental, social and governance (ESG) factors into the investment process.

Managing high yield public small caps with Robeco’s corporate bond selection model COALA

01-12-2010 | Research | Daniël Haesen, CFA, Patrick Houweling, PhD, Sander Bus

Generating benchmark-like returns is a difficult job in the High Yield corporate bond market. High index turnover and illiquidity, i.e. high bid-ask spreads, are the main reasons why passively tracking a High Yield index comes at significant costs.

Forecasting bond returns using jumps in intraday prices

28-11-2010 | Research | Johan Duyvesteyn, PhD, CFA, Martin Martens, PhD, Siawash Safavi Nic

We build on the work of Wright and Zhou (2009) who show that the average jump mean in bond prices can predict excess bond returns, capturing the countercyclical behaviour of risk premia.

Improving coverage ratios with less risk

29-10-2010 | Research | Pim van Vliet, PhD

Pension funds can protect funding ratios by making low-risk stocks a part of their equity allocation, says Pim van Vliet, Senior Portfolio Manager, Robeco Low Volatility Equities.

Value and Momentum in Frontier Emerging Markets

14-09-2010 | Research | Laurens Swinkels, Wilma de Groot, CFA

Not only do the value and momentum effects exist in frontier markets, these effects are uncorrelated with each other and with similar strategies in developed and emerging markets.

The volatility effect: lower risk without lower return

17-04-2010 | Research | David Blitz, PhD, Pim van Vliet, PhD

Efficient markets theory has been challenged by the finding that relatively simple investment strategies are found to generate statistically significantly higher returns than the market portfolio.

The volatility effect: lower risk without lower return

17-04-2010 | Research | David Blitz, PhD, Pim van Vliet, PhD

Efficient markets theory has been challenged by the finding that relatively simple investment strategies are found to generate statistically significantly higher returns than the market portfolio. Well-known examples are the value, size and momentum strategies, for which return premiums have been documented in US and international stock markets. Market efficiency is also challenged, however, if some simple investment strategy generates a return similar to that of the market, but at a systematically lower level of risk.

Predictability of bond markets

01-11-2007 | Research | Johan Duyvesteyn, PhD, CFA, Martin Martens, PhD

Some of the most influential scientific papers on the predictability of bond markets connect theory with the tested predictive power of the variables of Robeco’s duration model. A small sample of academic evidence on the predictability of fixed income markets is discussed in this paper and its link to the model is illustrated.

Foundation Paper: The success of stock selection strategies in emerging markets: is it risk or behavioral bias?

01-05-2005 | Research | Dick van Dijk, Geren de Zwart, Jaap van der Hart

An analysis of the success of value, momentum and earnings revisions strategies in emerging markets finds that behavioral biases are at work—just as in developed markets. This paper was later published in Emerging Markets Review.

Downside risk and empirical asset pricing

16-12-2004 | Research | Pim van Vliet, PhD

The last decades have witnessed some major developments in the field of asset pricing. These have contributed to a better understanding of stock, bond and other asset prices and have influenced other disciplines such as corporate finance and macro economics.

Foundation Paper: Stock Selection Strategies in Emerging Markets

01-12-2000 | Research | Dick van Dijk, Erica Slagter, Jaap van der Hart

A number of different quantitative investment strategies are applied to emerging markets. Value, momentum and earnings revisions strategies are found to be the most successful. This paper was later published in the Journal of Empirical Finance.

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