Objectives

The objective of this course is to have a view on the quantitative techniques that are most frequently used in the industry and adress the most actual debates in quantitative asset management. The material covers a review of smart beta techniques and quantitative portfolio construction techniques, applied across asset classes. We then gradually switch to more active approaches. A good part of the course is dedicated to factor investing, where we review the basic papers of risk premia and their most recent applications. Again, this topic is adressed across asset classes. Finally, we also touch on various ad-hoc topics, extensively debated in the quantitative asset management industry, such as Trend following, Socially responsible investing.

Contents

1. Smart beta

• Fundamental indexing
• Risk-based indexing
• Applications across asset classes

2. Active vs passive investing

• The active vs passive debate
• The fundamental law of active management
• Black-Litterman
• Measures of active investing

3. Factor investing

• Theory of factor investing
• Review of basic factors (value, momentum, carry, size, ...)
• Recent applications of factors
• Factor investing across asset classes
• Factor timing

4. ESG investing

References

• Roncalli T. , Introduction to Risk Parity and Budgeting, 2014
• Scherer B., Portfolio Construction and Risk Budgeting, 2010
• Qian E., R. Hua, E. Sorensen, Quantitative Equity Portfolio Management, 2007
• Grinold R. and R. Kahn, Active Portfolio Management, 2000
• Ang A., Asset Management, A Systematic Approach to Factor Investing, 2014
• Bali T.G., R.F. Engle, S. Murray, Empirical Asset Pricing: The Cross Section of Stock Returns, 2016
• Coqueret G. and T. Guida, Machine Learning for Factor Investing, 2021

Pre-requisites

QARM I (useful but not compulsory). Good command of Python and/or Matlab.

Evaluation

First attempt

Exam:

Written 1h30 hours

Documentation:

Not allowed

Calculator:

Not allowed

Evaluation:

The final grade is composed of a written exam (50%) et a group project (50%).

The written exam is an onsite digital exam (ENEP), composed of multiple choice questions.

For the project, a list of topics related to the course will be available where students will be requested to apply techniques covered in the course. The project will be done in small groups and will last for the whole semester. Grades for the project will be based on a final report and an oral presentation, done in front of the class.

Retake

Exam:

Written 1h30 hours

Documentation:

Not allowed

Calculator:

Not allowed

Evaluation:

The written exam is an onsite digital exam (ENEP), composed of multiple choice questions.

It will be an integrative exam (100% of the final grade)