Journal of
Systematic Investing

The latest issue of the Journal of Systematic Investing (JSI) is live! If you are not an EQD+ subscriber, email Danny Lowe if you would like access to the JSI and archive.

In the lead paper – ‘An Integrated Approach To Currency Factor Investing’ – Ananthalakshmi Ranganathan, Harald Lohre, Sandra Nolte and Houssem Braham show that parametric portfolio policies can help guide an optimal currency strategy when tilting towards cross-sectional factor characteristics, using G10 currencies. Drawing insights from a currency timing strategy, according to time series predictors, the authors further examine the parametric portfolio policy’s ability to mitigate the downside of the carry trade by incorporating an explicit currency factor timing element. This integrated approach to currency factor investing outperforms a naïve equally weighted benchmark as well as univariate and multivariate parametric portfolio policies.

‘Transfer Ranking in Finance: Applications to Cross-Sectional Momentum with Data Scarcity,’ is the next paper in the latest issue of the JSI. Modern cross-sectional strategies incorporating sophisticated neural architectures outperform traditional counterparts when applied to mature assets with long histories. However, deploying them on instruments with limited samples generally produces over-fitted models with degraded performance. Daniel Poh, Stephen Roberts, Stefan Zohren introduce Fused Encoder Networks – a hybrid parameter-sharing transfer ranking model which fuses information extracted using an encoder-attention module from a source dataset with a similar but separate module operating on a smaller target dataset of interest. This approach mitigates the issue of models with poor generalizability.

Following that paper, Francesc Naya, Jahja Rrustemi, Nils S. Tuchschmid of Haute Ecole de Gestion de Fribourg present ‘Incorporating Alternative Risk Premia into Balanced Portfolios: Is there any added value?’, where they examine whether the inclusion of ARP products adds value to a well-known benchmark of balanced allocation — the 60/40 world equity/bond portfolio — while also comparing the results of this addition to other alternative investment solutions in their paper “Incorporating Alternative Risk Premia Into Balanced Portfolios: Is There Any Added Value?”