‘Point-in-Time’ Risk Analysis for Equity Portfolios

About this event

Join SciX’s mini-webinar that will examine equity portfolio risk modelling by presenting the main results of our recent Market Review- Backward-looking Risk Analyses are Creating ‘Blind-Spots’ for Equity Investors. We will look at ‘point-in-time’ versus ‘historical’ equity portfolio insights, with case study-style analysis of U.S. and European equity markets. The fifteen-minute session will look both at some of the interesting findings that emerge from recent data and, importantly, at how practitioners can obtain point-in-time risk insights in a resource-light manner.

What you will take away from this fifteen-minute session:

• Point-in-time analysis of the S&P 500 uncovers higher exposure to market beta and certain sectors (particularly Technology) than a historical analysis would reveal, as well as short exposure to certain fundamental (style) factors. S&P 500’s volatility calculated on the last three years of historical returns is underestimated by 2.2% compared to a point-in-time forward-looking volatility. A similar analysis for STOXX Europe 600 leads to a 3.9% underestimation of risk.

• Moreover, the point-in-time factor profile for both the S&P 500 and the STOXX Europe 600 implies a reduction in simulated (out of sample) long-term average returns by approximately 1.1% and 0.8% p.a. respectively. A reduction is also observed in risk-adjusted long-term average returns.

• Extreme risk needs its own analysis. Despite the higher level of volatility, the point-in-time extreme risk estimate is not materially different from its historical counterpart. This is consistent with our previous study showing that extreme risk levels can be decoupled from day-to-day risk.