Tuesday, June 28, 2016
“Decomposition of Total Volatility in U.S. Equities: How Important is Idiosyncratic Risk”
Indrani De, Senior Director – Risk Management, TIAA
“Exploring Potential and Problems with China’s Capital Markets”
Sol Steinberg, Founding Principal, OTC Partners
Venue: Bourbon Street Bar and Grill, 346 W 46th Street, between 8th and 9th Avenues, New York, NY 10036 – note this is two blocks north or our previous venue.
http://www.bourbonny.com/contact accessible 42nd Street, Port Authority (A, C, E lines)
5:30- 6:00 Registration, Networking, and Refreshments
6:00 – 6:05 Chapter Business – Mike Carty, New Millennium Advisors
6:05 – 6:45 “Decomposition of Total Volatility in U.S. Equities: How Important is Idiosyncratic Risk”, Indrani De, Senior Director – Risk Management, TIAA
Indrani will be presenting her published research paper ” Decomposition of Total Volatility in U.S. Equities: How Important is Idiosyncratic Risk”. This paper was published while she was working at New Amsterdam Partners.
In recent years there has been a lot of debate about volatility, the risk-on/risk-off market with a focus on macro and factor risks. Our research uses the methodology of Campbell et al. (2001) to break down the total volatility in US equities into the three components of Market, Industry and Firm (idiosyncratic risk), and analyzes the trends in their share over 2005-2014. The value addition from active stock selection is greater when idiosyncratic risk becomes a bigger component of total volatility. Our main conclusion is that there is a strong payoff to stock selection even in the post-financial crisis era where markets often think of risk only in terms of risk-on/risk-off. The share of idiosyncratic risk indicating benefits of stock selection decreased a lot during the crisis. It is now at the highest level since the start of the financial crisis, though still much lower than in the pre-crisis years.
Total volatility increased ~4X during the crisis and is now lower than pre-crisis. The share of idiosyncratic volatility dipped sharply during the crisis, but remains the largest component (> 60%) of total volatility for an equity investor. The share of market volatility increased ~4X during the crisis to become the largest component. Currently much lower, it is still 2X prior-recession average and higher than the long-term average. Sector volatility has shown a consistent decrease over 2005-2014, and is now the smallest share of total volatility. Average pair-wise stock correlation in the S&P 500 increased ~3X from pre-crisis years through 2010, and is now 2X pre-recession average. The power of the market model in explaining stock returns, increased sharply from 22% pre-crisis to more than 50% in 2010, and has since decreased and remained consistent at ~30%. We also found a strong negative correlation between all components of volatility and contemporaneous GDP growth, with the information decay being fastest for idiosyncratic volatility. Idiosyncratic risk as a share of total stock volatility, though lower than pre-crisis levels, is the highest since the financial crisis. It remains the largest share of total U.S. equity volatility providing a strong justification for stock selection and active management.
6:45 – 7:00 Refreshment and Networking Break
7:00 – 7:45 “Exploring Potential and Problems with China’s Capital Markets”, Sol Steinberg, Founding Principal, OTC Partners
“Decomposition of Total Volatility in U.S. Equities: How Important is Idiosyncratic Risk”, Indrani De, Senior Director – Risk Management, TIAA
Indrani De, CFA, PRM, is Senior Director – Risk Management at TIAA, and her responsibilities include macroeconomic and financial markets analysis, stress testing and sensitivity analysis, key risk indicators, building asset valuation models, and identification and evaluation of emerging risks. Prior to TIAA, she was Senior Director of Quantitative Research at investment firm New Amsterdam Partners. Earlier in her career, she worked as an investment analyst for GE Capital and 20th Century Venture Capital. She has been published in the Journal of Investing, Journal of Investment Consulting, and NYSSA Financial Professionals’ Post. Indrani is the Past-President and on the Board of Directors of the Society of Quantitative Analysts (SQA). She has been a speaker multiple times at leading industry conferences and been quoted in major media outlets like Reuters, Forbes, Financial Planning and Pensions & Investments. She received an undergraduate degree in Economics (Honors) from University of Delhi, and an MBA from the Indian Institute of Management (Bangalore). Indrani completed the coursework for a PhD (Business-Major in Finance) at the City University of New York with full merit scholarship, and holds the Chartered Financial Analyst and Professional Risk Manager designation.
Sol Steinberg, Founding Principal, OTC Partners
Sol is a seasoned financial executive with subject matter expertise in OTC derivatives, Market structure, Trade Lifecycle, Valuation, Financial Technology Systems, Strategic Design, Commercialization of assets, and Risk Management.
Sol has a wide-ranging network of asset managers, analytic providers, execution venues, regulatory, and government contacts. Sol has used his eco system to successfully commercialize analytics, data, and other non commercialized intellectual property. He has had significant monetization success; brought to market several initiatives, including institutional and commercial risk engines such as SMART tool, Risk Explorer, Global Market Risk System for Citi: the largest VaR engine in the world 2004-2006, as well as developing CCP2 – a derivative education & certification program for consultancies such as Deloitte and Accenture.
In 2012, he founded Partnerships & Alliances, a team responsible for managing SwapClear’s strategy and relationships with key ecosystem partners including consultancies; execution venues and affirmation platforms; providers of technology systems and services; custodians; hedge fund administrators; data and valuation firms; and selected professional associations.
In 2011 Sol was responsible for LCH.Clearnet’s industry recognized clearing and default management policies for the cleared OTC swap markets. Sol was also first to recognize and instrumental in correcting and project managing for changing LCH.Clearnet’s risk analytics in times of low market rates, making our analytics robust enough to handle all market conditions.
Sol specializes in commercialization agreements for risk models, risk data, market data, and collateral optimization, as well as developing and monetizing SME intellectual property. Sol was the recipient of Risk Magazine’s award “Best risk analytics initiative 2012” & “Best risk analytics initiative (Sell Side) 2013” and FTF’s award for “Most cutting edge risk contribution 2013” for developing, project managing , and architecting the SMART risk analytics tool. Sol was also a global nominee in 2012 for “Best Practices in Global Financial Risk Management” from PRMIA, Professional Risk Managers International Association. He is a regular speaker and author for many industry groups.
QWAFAFEW NYC 2016 schedule
Tuesday, January 26th – Dan diBartolomeo, President, Northfield Information Services and Anish Shah, Investment Grade Modeling, LLC
Tuesday, February 23rd – Mark Carhart, Kepos Capital and Tony Webb, FINCAD
Wednesday, March 23rd (please note date change)- Tim Gaumer, CFA, Global Director of Fundamental Research at Thomson Reuters & Andrew B. Weisman, Chief Investment Officer, Janus Liquid Alternatives
Tuesday, April 12th (please note date change) – Dr. Richard Michaud, President and CEO, New Frontier Advisors, LLC. And Michael Venuto, Co-Founder and Chief Investment Officer of Toroso Investments, LLC
Tuesday, May 24th – Yin Luo, CFA, Managing Director, Global Head of Quantitative Strategy, Deutsche Bank “Quantitative Investing of Bank and Insurance Stocks” and Ding Liu, Senior Quant Researcher, AB Bernstein, will present on “Pure Quintile Portfolios”
Tuesday, June 28th – Indrani De, Senior Director, Risk Management, TIAA will present “Decomposition of Total Volatility in U.S. Equities: How Important is Idiosyncratic Risk” and Sol Steinberg, Founding Principal, OTC Partners
Tuesday, July 26th – Mary Ann Bartels, BofAML & Sam Stovall, US Equity Strategist, S&P Capital IQ Market Intelligence, “Rules-Based Sector-Rotation Strategies”
Tuesday, August 23rd – Diane Garnick, Chief Income Strategist, TIAA & TBA
Wednesday, September 7th – Jason MacQueen, Director of Research, Northfield Information Services Inc. “Rules-based Style Rotation : Dynamic Switching with Smart Portfolios” & TBA
Tuesday, September 27th – ETF Expert Panel moderated by Arlene C. Reyes, COO, Exchangetradedfunds.com & TBA
Wednesday, October 26th – Marvin Appel, Ph.D., President, Signalert Asset Management, “Active Asset Strategies for ETF Investors”& TBA
Wednesday, November 16th – Dr. David N. Esch, Managing Director of Research, New Frontier Advisors & TBA
QWAFAFEW is now soliciting presentation volunteers to schedule in 2016. Send a note to firstname.lastname@example.org if you are interested. New York is the primary focus. However, if you wish to present in Boston, Chicago, Denver, Los Angeles, Philadelphia, Pittsburgh, Princeton, San Francisco or Washington, DC, please include that in your response and that information will be conveyed accordingly. As always, presentations must involve research and be educational in manner; while products can be mentioned and touched upon briefly, no product presentations will be accepted. Disclaimer: Volunteering does not guarantee acceptance.