Making credit beta work for real: Scaling index risk to information

- "Credit beta – long-only index exposure – appears to deliver little in the long term. What we think works far better is adjusting index exposure between long, short or flat based on slow-moving changes in macro-credit conditions. This is because index returns in the future are semi-predictable based on information available in the present. Nomura’s Credit Scorecard offers a mechanism to benefit from this predictability. The Scorecard has not outperformed a long-only index in every period of time and will not in the future. But it has offered compelling outperformance in the medium term."

Nomura Quantitative Strategies 20100913

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