25/10/2012: IFS Roundtable: November 1

I will be chairing an industry roundtable on disruptive innovation in international financial services on November 1, 2012. Details:

25/10/2012: Signs of Life or a Dead-Cat Bounce : RPPI September 2012

With some delay an update on the latest data from the Residential Property Price Index for Ireland and some longer-range thoughts on property prices direction.

First top level data:

Headline RPPI has risen from 64.2 in August to 65.8 in September (+0.92% m/m). The index is still down 9.62% y/y.

• This marks a third consecutive month of index increases (July +0.15%, August +0.46%) and over the last 3 months cumulative index gains were 1.54% (annualised rate of growth of 6.32%). This is one headline  you keep hearing. However, last 6 months cumulative change in the RPPI is still negative at -0.45% (annualized rate of growth of -0.91%).
• What you don't hear about is that August rise was the first statistically significant increase in the index since February 2007 (in m/m terms) and the largest monthly rise since then (in February 2007 index rose 0.935% m/m). In general, irish statistical releases do not provide analysis of statistical significance of changes. Yet, the lack of statistical significance in previous monthly increases is precisely the reason why I am hesitant in calling the trend reversal (on dynamics - for fundamentals, see below).
• Year on year September showing (-9.62%) is the best since October 2008 when y/y change was 9.53%. This too is a decent sign. However, it is statistically in-distinguishable from the crisis period average of -12.95%. Which is exactly the point of dynamics - while three months of slight increases is a good sign, it is still fragile to establish a trend reversal formally.
• The index is now 49.58% off the peak, so overall prices have roughly returned to the level where they were... err... in March-April 2012. With all the hoopla of the 'stabilisation' and 'price increases' over the last 3 months, all we've regained in terms of prices is roughly-speaking 5 months worth of prices. Three steps forward, two steps back market is only as good as the pattern repeats, like, 10 times or so?

Dublin trends: RPPI for Dublin rose to 58.7 in September from 57.3 in August (+2.44% m/m) but is still down 9.83% y/y. The dynamics for Dublin prices imply 3mo cumulative rise in prices of 1.56% (+6.38% annualized) and 1.21% cumulated increase in 6 months (annualized +2.43%). It is clear that Dublin prices drive national trends and that in dynamic terms, Dublin prices are pretty much in the very same shape as national prices.

• Just as with national prices, Dublin prices m/m increase in September was the first statistically significant rise for the entire period of the crisis. This is good. 
• Dublin prices currently stand at the levels comparable to December 2011-January 2012, which is marginally better than the prices levels nationwide.
• Of course, Dublin prices have fallen to 56.36% of their peak (at the trough level, the decline was 57.40%).
• However, dublin price increase in m/m terms in September is the first monthly increase and can probably be explained by a number of one-off factors (see fundamentals discussion below).

Overall, my conclusion is that there is a welcome tentative sign of stabilization in the national house prices trend, but it is too early to call a reversal of the trend to rising prices.

The risk is still exceptionally heavily weighted to the continued decline in Irish property prices for a number of fundamental reasons:

1. In my opinion, August-September figures, and likely the rest of the year figures are skewed by a number of one-off factors: eminent expiration of interest relief measures, comes January 2013, build up of demand during the rain-soaked summer when house-viewing was outright an occupation for the brave, a number of larger auctions coming through both brining in some supply to the market and generating a bit of a hype in the media.
2. In 2013 we can expect serious pressure on the market rising from such longer term factors as:

• Budget 2013 income and indirect tax changes that will reduce further purchasing power of Irish households;
• Budget 2013 changes in relation to property taxation;
• Continued increases in mortgage rates charged by the banks compounding after-tax income decreases to be delivered by the Budget;
• Gradual acceleration of foreclosures during the second half of 2013 as Personal Insolvencies Bill  starts to bind;
• Potential changes to pensions funding reliefs resulting in a last-minute rush to recap pensions in anticipation of future changes which wil act to reduce funds available for purchases;
• Reductions in the deposit rates in the banks will lead to a gradual shifting of savings out of cash deposits into pensions and investment products (this factor can also provide some relief to the property markets, although this support is likely to be more fragile than property agents and mortgages brokers might suggest)
• Yields can significantly decline if/when buy-to-let properties start flooding the markets (my expectation - late 2013-early 2014).

None of the above prices the risk of further economic deterioration. Yet, as today's Troika statement clearly suggests, we are likely to witness declines in real GNP this year and next - which will do nothing to support price appreciation in the property markets.

I am currently reworking my 2012-2013 forecasts for the property prices in Ireland, so stay tuned for the updates.

25/10/2012: My notes for the interview on Troika review

Here is transcript of my interview on today's radio programme covering the Troika review of Ireland - warning: unedited material. Italics denote quotes from the Troika statement.

Unfortunately, Ireland's recovery will not be achieved or even started by the exit from Troika funding program. For a number of reasons, conveniently omitted by Minister Noonan, but some of these are hinted at in the Troika assessment:

1) Real recovery will require dealing with private (household) debts. This is not happening and Troika review, as well as increasingly frustrated tone coming from our own Central Bank clearly show that. 

Once Ireland exits the bailout, we will have to fund our Exchequer debt repayments and reduced deficits via borrowing in the private markets. It might be that we will be able to fund ourselves at lower cost than currently, but the cost is likely to be still above that obtainable via ESM or Troika. This means more resources will be sucked out of the weak economy, further reducing the pace of private economy deleveraging. In other words, exit from the bailout will likely make it harder for the economy to recover.

2) Real recovery will require economic activity to start picking up in terms of private domestic investment, household spending, expanded activities by our own firms, not MNCs in exporting. All of this requires credit, it also requires disposable income.  Again, this will be only hindered by Ireland 'exiting' Troika funding.

3) Recovery in the  fiscal space will require lower, not higher, costs of funding for the Exchequer debt roll-overs and paydowns of Troika debts. As above, exit from the bailout will likely assure that this cost will be rising, not falling.

4) Recovery in the economy will require the Exchequer restructuring, significantly, some of the banks-related debts carried by the State. Most notably - the likes of the promissory notes - and this is clearly not going to be consistent with the Exchequer borrowing in the markets, at least not while we restructure the banks-related debt. It is better for Ireland to stay within the ESM and deliver on restructuring, and only after that aim to gradually exit the programme.

5) Lastly, recovery on exit from the program will require more aggressive reforms and stringent adherence to the fiscal discipline established. Alas, once we exit the program, the Government will lose its ONLY functional trump card in dealing with the Trade Unions. The Bogey Man of the Troika will be gone and the Social Partners will most likely exert pressure on the Government to borrow beyond its means to compensate them for the hardships of the Troika period. We can be at a risk of undoing overnight the precious little progress we've achieved to-date.

So, overall, I do not think this economy is going to recover once we exit the bailout. In fact, I think the entire logic of this argument as advanced by Minister Noonan is backwards. We should only exit the bailout once the economy is sufficiently strong to sustain orderly transition from subsidized funding to real world funding. Exiting Troika arrangements will not free Ireland from painful adjustments needed, but will likely risk derailing what has been achieved so far.

On Troika review specifics:

Banks remain well-capitalised and downsizing has progressed well, yet further efforts are needed to address their profitability and asset quality challenges.

Irish banks are well capitalized solely because there are no substantial writedowns of mortgages being undertaken in the banking sector. Meanwhile, mortgages arrears are snowballing, implying that the current levels of capitalization are unlikely to be sustained in the short term future. In other words, Troika praise here is simply a PR exercise.

Real GDP growth has slowed to a projected rate of ½ percent in 2012. Prospects for growth in 2013 are for modest pick up to just over 1 percent as domestic demand declines moderately...

So if I get this right: GDP will grow 0.5% in 2012 and 1.0% in 2013. GNP will shrink in 2012 and 2013 as well. Which means the real economy in Ireland - the one you and I and the listeners to this station are inhabiting will be shrinking 6 years in a row. That's 'strong performance'? In real terms we had GNP of 162bn in 2007, it fell to 127 billion in 2011 and is now, as IMF suggests will fall even further - close to 122-124bn or lower by the end of 2013. This is the much-lauded recovery we are bragging about?!

The authorities are ramping up reforms to restore the health of the Irish financial sector so that it can help support economic recovery. Intensified efforts are required to deal decisively with mortgage arrears and further reduce bank operating costs.

What are these reforms? Anyone noticed ANY progress in the banking sector? Especially on dealing with mortgages? I didn't. May be Minister Noonan can show us some couples who had their debt problems resolved? Not delayed, not shelved, but actually resolved. 

25/10/2012: Icelandic experience on mortgages writedowns

Very interesting post linking Icelandic experience in mortgages writedowns to Ireland's situation from Sigrún Davíðsdóttir link here.

Needless to say, I agree - we need a sustainable long term solution and this will require dealing systemically with private debt overhang.

25/10/2012: Cool infographic on social media use in the US Elections

Cool infographic summarizing use of social media in the US elections so far:
http://open-site.org/blog/social-media-election/

(click to enlarge or best go to the link above)

23/10/2012: Article in Expresso

A link to the Portugal's Expresso article on sovereign debt risk premia quoting me.

23/10/2012: HFT restrictions and market efficiency

In my class on Investment Theory (MSc in Finance, TCD) we've discussed the issues relating to markets efficiency, HFT and relative speeds in newsflow and trading. We are going to talk more about this subject in my course on HFT in early 2013.

Here is the latest report on the effects of the EU regulatory interference in HFT.

Quote: "European Union plans to clamp down on trading shares faster than the blink of an eye could damage market efficiency and reduce liquidity, a UK government-sponsored paper said… A report by the Foresight Project, which was sponsored by the British government and gathered evidence from 150 academics and experts from 20 countries, said plans to force minimum resting times on orders could reduce liquidity."

The Project (led by John Beddington, the UK's chief scientific advisor) has found that:

• "...some of the commonly held negative perceptions surrounding HFT are not supported by the available evidence and, indeed, that HFT may have modestly improved the functioning of markets in some respects"
• "However it is believed that policymakers are justified in being concerned about the possible effects of HFT."
• "The report found no direct evidence that HFT increased volatility, nor evidence to suggest it has led to an increase in market abuse."
• "It said that computer-based trading could have adverse side effects in some circumstances and that these risks should be addressed."

As my students would know, I am of two views on HFT:

1. HFT is a necessary activity with inherent risks (as any other activity in the market) 
2. HFT can act in contradiction to the direct real-activity nature of the financial markets, but so can other financial instruments and strategies (e.g. hedging across non-asset-related risks, e.g. using Forex markets).

23/10/2012: Signs, Indicators and Noise

From time to time in the past I used to look at CDS spreads for sovereigns. I have not done so in a while. In fact, I have not even updated my database for these in a while. Why? Because something is dodgy about the sovereign assets' market that is manipulated by the sovereigns. And here's a quote from the TF Market Advisors that sums it up well enough:

"One of the effects of the central bank policies is that many of the more obscure parts of the market that you could look to for clues or early warning signs have been eliminated. Sure these markets still exist, but the information from them is so manipulated that it is difficult to get a clear read."

1. LIBOR : "Between Fed lending programs, LTRO, and the lawsuits, I have no clue what to make of LIBOR other than it probably isn’t a whole lot of use as a sign of anything."
2. EUR/USD 3 month basis swap : "...was another useful indicator showing the relative strength of US banks versus European banks. Again with LTRO and various central bank global swap lines, this measure has become useless. With banks willing to use central bank liquidity without fear of reprisals or negative stigma, they do, and this rate hovers right around where the governments would like it to be."
3. European sovereign CDS : "has become far more difficult to interpret as all these naked bans get enforced. French CDS went from 106 on the 11th of October to 65 today, in pretty much a straight line. I have difficulty thinking of one real reason that France could have done so well – they have funded ESM, instituted some domestic policies that seem dubious at best, have had weak economic data, and are marching to the beat of their own drum in the Euro in a way that indicates willingness to take on more debt, yet they are tighter. This makes it hard to figure out what is going on in European bank CDS."
4. US Treasury Yields : "...are very difficult to figure out. The Fed owns over 35% of treasuries with maturities 5 years and longer. Almost everything you would look at and try and infer from the treasury market is skewed by that."
5. Economic data "has even come under attack. In general I don’t believe the data is manipulated, particularly not for political purposes (but there are a growing number of people who do). But I do think they try and cover up their own mistakes. Jobless claims came in at 337k or something (pre upward revision) two weeks ago. There was a lot of concern, and some very good economists spoke to the BLS and came up with the conclusion that one big state had not sent in their quarter end revisions in time. There was some confirmation of this, but then some sort of denial. Missing the deadline would be an honest mistake in my opinion, it shouldn’t happen, but I can see how it could. Then last week, we posted 388k as the number. Now we have data that looks like 369k, 342k, and 388k. Is the reality that had they properly accounted for the missing number, that the claims have been 369k, 365k, 365k? If so, we have okay but steady claims. If the actual data is correct (which I don’t think it is) then we would have seen some euphoric hiring followed by aggressive firing. I find that harder to believe."

Note, I wrote about US jobless claims figure here.

There is a major problem, folks. While we can debate the numbers left, right and center, what is clear is that the current environment (political, monetary and policy) is becoming less and less transparent. The market signals are being distorted (willingly and via the law of unintended consequences) and this does not bode well for the future. 

22/10/2012: Financial Crises: Borrowers Pain, Creditors Gain

A very interesting paper on the effects of the financial crises on imbalance of power (and thus the imbalance of the incidence of costs) between the borrowers and the lenders. The paper is a serious reality check for Irish policymakers in the context of the 'reforms' of the Personal Insolvency laws currently being proposed. In fact, the Irish proposed 'reforms' actually tragically replicate the very worst implications of the study summarized below.

"Resolving Debt Overhang: Political Constraints in the Aftermath of Financial Crises" by Atif R. Mian, Amir Sufi, and Francesco Trebbi (NBER Working Paper No. 17831, February 2012 http://www.nber.org/papers/w17831) shows that "debtors bear the brunt of a decline in asset prices associated with financial crises and policies aimed at partial debt relief may be warranted to boost growth in the midst of crises. Drawing on the US experience during the Great Recession of 2008-09 and historical evidence in a large panel of countries, [the study explores] why the political system may fail to deliver such policies. [The authors] find that during the Great Recession creditors were able to use the political system more effectively to protect their interests through bailouts. More generally we show that politically countries become more polarized and fractionalized following financial crises. This results in legislative stalemate, making it less likely that crises lead to meaningful macroeconomic reforms."

Mortgage recourse:

"The higher level of recourse and tougher rules for declaring bankruptcy are likely to prevent borrowers from declaring default. As a result, debtors in European countries are more likely to absorb financial shocks internally than declare default. …We investigate this …by comparing the change in default rates across Europe and the United States during the 2007 to 2009 global housing crisis. Since the bankruptcy regime is relatively more lax in the United States, one would expect a larger increase in default rates." Controlling for rates of decline in house prices and the level of indebtedness of the borrowing households (LTVs at origination) the authors test explicitly data for US, U.K., Spain, France and Ireland from 2007 to 2009 using data from the European Mortgage Federation. 

Figure 1 

"The change in default rate (red bar) for USA between 2007 and 2009 is 5.9 percentage points. While the default rate level in 2007 is not shown in Figure 1, it is quite low and similar across the five countries (0.4%, 1.2%, 0.7%, 1.9%, and 2.1% for France, Ireland, Spain, the United Kingdom and the United States, respectively). …All European countries in Figure 1 have high recourse and tough bankruptcy laws relative to the United States. The very large increase in default rates for the US is consistent with the notion that lower level of recourse and easier bankruptcy legislation helps indebted borrowers declare default. …A collective look at the three housing market variables in Figure 1 shows that the United States experienced the highest increase in default rates by far, despite some of the European countries experiencing very similar (if not stronger) decline in house price (e.g. Ireland) and having similar housing leverage (Ireland and the United Kingdom)."

  

The Political Response to Financial Crises and Debt Overhang:

                                                

"The 2007-2009 US financial crisis provides an interesting case study to examine the political tug of war between debtors and creditors. …[In the US], housing assets were the main asset for low net worth individuals, and their housing positions were quite levered. As a result, the collapse in house prices disproportionately affected low net worth individuals. Mian, Rao, and Sufi (2011) show that at the 10th percentile of the county-level house price distribution, house prices dropped by 40 to 60% depending on the house price index used. This decline would completely wipe out the entire net worth of the median household in lowest quintile of the net worth distribution. CoreLogic reports that 25% of mortgages are underwater; for the low net worth individuals in the US, this effectively means that their total net worth is negative." 

"It is in this context that Mian, Sufi and Trebbi (2010a), henceforth MST, document the political economy of two major bailout bills that were passed in the US Congress in 2008. The first of these bills, the American Housing Rescue and Foreclosure Prevention Act (AHRFPA), provided up to $300 billion in Federal Housing Administration insurance for renegotiated mortgages, which translated into using public funds to provide debtor relief… At the same time, creditors--i.e., the shareholders and debt-holders of large financial institutions--pushed a second bill which was closely tied to protecting their own interests [the $700 billion Emergency Economic Stabilization Act (EESA) which eventually led to TARP]…"

"While both debtors and creditors were effective in passing legislation in their favor, there were two important differences in the magnitude of their effectiveness. First, the debtor friendly bill provided fewer resources ($300 billion versus $700 billion) than the creditor friendly legislation… [despite the fact that] debtors faced substantially larger losses …than creditors in the face of the US housing crisis. Second, while the creditor friendly EESA bill was fully implemented and executed, the housing legislation was a miserable failure. As of December 2008, there were only 312 applications for relief under the program and the secretary of Housing and Urban Development was highly critical of the program. … When Obama Administration …implemented the Home Affordability Modification Program under AHRFPA, their initial goal was to help 3 to 4 million homeowners with loan modifications. In July, 2011 President Obama admitted that HAMP program has “probably been the area that's been most stubborn to us trying to solve the problem.”" 

"It is worth noting that one of the main reasons for the ineffectiveness of the HAMP program has been the lack of cooperation from creditors. The initial legislation made creditor cooperation completely voluntary, thereby enabling many creditors to opt out of the program despite qualifying borrowers. In fact, as Representative Barney Frank noted, banks actually helped formulate the program in the summer of 2008."

Need I remind you that in Ireland's reform bill to alter the draconian personal insolvency laws currently on the books, the banks not only have an option of voluntary participation, but an actual veto on resolution mechanism deployed.

"Cross-country evidence on financial crises and change in creditor rights The seminal work of La Porta et al (1998), followed by Djankov et al. (2007), introduced cross-country index of “creditor rights” from 1978 to 2002. The index captures the rights of secured lenders under a country’s legal system. A country has stronger creditor rights if: 

1.  there are restrictions for a debtor to file for reorganization [In the case of Ireland's Insolvency Law reform, this factor is actually made worse than in the current legislation since the reform law is going to force debtors to undergo a period of compulsory arrangements dictated solely by the banks before they can file for bankruptcy]; 
2. creditors are able to seize collateral in bankruptcy automatically without any “asset freeze” [again, my reading of Ireland's 'reform' proposals suggests automatic seizure of assets once bankruptcy is granted]; 
3. secured creditors are paid first [as is the case in Ireland]; and 
4. control shifts away from management as soon as bankruptcy is declared.  

"Overall, while creditor rights promote the origination of more credit, a financial crisis that results from excessive debt tends to reduce creditor rights. These results highlight a fundamental tension between the benefits of stronger creditor rights ex-ante and the debt overhang costs associated with giving creditor too much power in the financial crisis state of the world. Ex-post relaxation of creditor rights is not the norm after a financial crisis. …More specifically, we show that financial crises are systematically followed by political polarization and that this may result in gridlock and anemic reform. …Financial crises polarize debtors and creditors in society. On the one hand, debtors are weakened by a fall in the value of assets they hold. On the other hand, creditors become more sensitive to write-offs during bad times …and possibly more reluctant to converge onto a renegotiated platform because of their increased reliance on the satisfaction of the original terms of agreement."

22/10/2012: Income Tax in Ireland: a snapshot

Another tax chart (source here) on effective income & social security taxes in various countries:

And so where's Ireland in this? I took KPMG tax calculator for 2012 and... for a person on $100,000 (depending on which exchange rate you take - spot or 3mo average), Ireland scores:

• Self-employed person, single, no children effective tax rate of 40%
• PAYE effective tax rate of 37.5-37.75%
• Average for a single earner tax rate of 38.42%

See for yourselves where that places Ireland.

More on this in forthcoming Village Magazine issue.

22/10/2012: Is Ireland a 'Special Case' in the Euro area periphery?

Since the disastrously vacuous summit last Thursday and Friday, there has been a barrage of 'Ireland is special' statements from Merkel and other political leaders. The alleged 'special' nature of Ireland compared to Greece, Portugal and Spain is, supposedly, reflected in Irish banks being successfully repaired and Irish fiscal crisis corrected to a stronger health position than that of the other peripheral countries.

I am not going to make a comment on the banking system's functionality in Ireland compared to other states. But on the fiscal front, let's take a look. Per IMF:

• In 2012 we expect to post a Government deficit of 8.30% of GDP against Greece's deficit of 7.52%, Portugal's 4.99% and Spain's 6.99%. We are 'special' in so far as we will have the highest deficit of all peripheral countries.
• In 2013, Ireland is forecast to post a Government deficit of 7.52% of GDP against Greece's 4.67%, Portugal's 4.48% and Spain's 5.67%. Once again, 'special' allegedly means the 'worst performing'.
• In 2012, Ireland's structural deficit would have fallen from 9.31% of potential GDP in 2010 to 6.15% - a decline of 3.16 ppt. For Greece, the same numbers are 12.12% to 4.53% - a decline of 7.59 ppt or more than double the rate of austerity than in Ireland. For Portugal, these numbers are  8.96% to 4.09% - a decline of 4.87 ppt of more than 50% deeper reduction than in Ireland. For Spain: 7.32% to 5.39% - a drop of 1.93 ppt or shallower than that for Ireland.
• In 2013 in terms of structural deficit, Ireland (5.38% of potential GDP deficit) will be worse off than Greece (-1.06% of potential GDP), Portugal (2.28%) and Spain (3.52%)

Now, run by me what is so 'special' about Ireland's fiscal adjustment case?

Can it be that we are 'lighter' than other peripherals on debt?

• 2010 Government debt in Ireland stood at 92.175% of GDP and this year it will be around 117.743% - up 25.255% of GDP. For Greece this was respectively 144.55% of GDP in 2010 and 170.731% in 2012 - a rise of 26.181%, marginally faster than that for Ireland. For Portugal, gross Government debt was 93.32% of GDP in 2010 and that rose to 119.066% in 2012, an increase of 25.746%. Again, not far from Ireland's. And for Spain, these numbers were 61.316% to 90.693% - a rise of 29.377%. So while Spain is clearly the worst performer in the class, Ireland, Greece and Portugal are not that far off from each other.

Wait, what about economic reforms and internal devaluations? Surely here Ireland, with its exports-focused economy is a 'special' case?

• In 2012, Ireland is expected to post a current account surplus of 1.813% of GDP, against deficits of between 0.148% and 2.909% for the other three peripheral countries. This, of course, is not the legacy of Irish reforms, but of the MNCs operating from here.
• However, in terms of current account dynamics, Ireland is not that special. Between 2010 and 2012, Greece will reduce its current account deficit by 4.294 ppt, Ireland will improve its external balance by 0.674 ppt, Portugal by 7.105 ppt and Spain by 2.278 ppt. So Ireland is the worst performing country of four in terms of current account dynamics, while the best performing in terms of current account balance.

Now, do run by me what can it possibly mean for Ireland to be a 'special' case compared to Greece, Portugal and Spain?

21/10/2012: Some links for Investment Analysis 2012-2013 course

For Investment Analysis class - here are some good links on CAPM and it's applications to actual strategy formation & research, and couple other topics we covered in depth:

Classic:
"The Capital Asset Pricing Model: Theory and Evidence" Eugene F. Fama and Kenneth R. French : http://papers.ssrn.com/sol3/papers.cfm?abstract_id=440920

"CAPM Over the Long-Run: 1926-2001", Andrew Ang, Joseph Chen, January 21, 2003: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=346600

"Downside Risk", Joseph Chen, Andrew Ang, Yuhang Xing, The Review of Financial Studies, Vol. 19, Issue 4, pp. 1191-1239, 2006

"Mean-Variance Investing", Andrew Ang, August 10, 2012, Columbia Business School Research Paper No. 12/49  http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2131932&rec=1&srcabs=2103734&alg=1&pos=1



More related to the Spring 2013 course on HFT and Technical Models:
"A Quantitative Approach to Tactical Asset Allocation" Mebane T. Faber : http://www.mebanefaber.com/2009/02/19/a-quantitative-approach-to-tactical-asset-allocation-updated/

"The Trend is Our Friend: Risk Parity, Momentum and Trend Following in Global Asset Allocation", Andrew Clare, James Seaton, Peter N. Smith and Stephen Thomas, 11th September 2012: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2126478

"Dynamic Portfolio Choice" Andrew Ang: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2103734