Weekly Top 5 Papers – April 29, 2019

1. Who Owns Huawei? by Christopher Balding (Fulbright University Vietnam) and Donald C. Clarke (George Washington University Law School)

2. The 7 Reasons Most Econometric Investments Fail by Marcos Lopez de Prado (Cornell University – Operations Research & Industrial Engineering)

3. Entrepreneurial Finance and Moral Hazard: Evidence from Token Offerings by Paul P. Momtaz (University of California, Los Angeles (UCLA))

4. Technical Evaluation of LEED-v4.1-(BD+C: NC) for Rating and Certification of Sustainable New Construction Outside the USA by Hazem R. Bonna (Ph.D. in Sustainable Construction, Al-Azhar University, Faculty of Engineering, Civil Engineering Department, Cairo) and Ahmed S. El-Hakim(Al-Azhar University, Cairo – Department of Civil Engineering) and Hatem S. El-Behairy (Al-Azhar University, Cairo – Department of Civil Engineering)

Sustainable new construction should be designed, built, and commissioned according to their local environment, local society, and local economy and therefore, the assessment criteria should be customized to match each different territory, region, and country. Consequently, the concept of having a single unified international rating system which can fit everywhere in the universe is simply a wrong concept, and it is aggressively criticized by this paper through the technical evaluation made for the LEED-v4.1-(BD+C: NC) system to elaborate remarks of utilizing the system outside the USA.

The paper concluded that the LEED-v4.1-(BD+C: NC) system, which is a well-known international system with global reputation as it is made for both inside & outside the USA, did not match all circumstances & sustainable needs for the example taken to represent international locations that have foreign environmental conditions, variant equity needs, and disparate economic concerns. – Dr. Hazem R. Bonna

5. Time-Series Momentum: A Monte-Carlo Approach by Clemens Struck (University College Dublin) and Enoch Cheng (University of Colorado at Denver – Department of Economics)

During my days as an undergraduate student, my professors showed me a set of very simple trading strategies such as the carry trade. Such strategies are usually referred to as “factor investment”. Bringing prior trading experience to the degree, I found it hard to believe that one can make serious money by following a set of naïve trading rules. Not surprisingly, many factor investors have experienced disappointment by the real-life performances of such strategies.
 
An observation I made early was that all of these rules seem to work fine in historical backtests over very short periods of time usually not longer than 10 or 20 years. Often, the sample periods contain only a single extreme market situation (e.g. a larger recession) that determines the overall performance of a strategy. Effectively, there is just one observation. 
 
While I see the need for historical backtests, I believe these tests are insufficient. Bootstrapping has been suggested as an alternative. I think we need to go one step further as bootstrapping repeats the same extreme events again and again. Thus, when you bootstrap from a historical sample with one extreme event, you repeatedly analyze the same extreme event. That’s why we looked out for something else and found Monte-Carlo approaches in the risk management literature and hand-tailored them to assess factor investment strategies. – Clemens C. Struck

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