Fall 2018

Dangxing Chen, UC Berkeley: Predicting Portfolio Return Volatility at Median Horizons

Commercially available factor models provide good predictions of short-horizon (e.g. one day or one week) portfolio volatility, based on estimated portfolio factor loadings and responsive estimates of factor volatility. These predictions are of significant value to certain short-term investors, such as hedge funds. However, they provide limited guidance to long-term investors, such as Defined Benefit pension plans, individual owners of Defined Contribution pension plans, and insurance companies. Because return volatility is variable and mean-reverting, the square root rule for...

Montserrat Guillen, University of Barcelona: Is motor insurance ratemaking going to change with telematics and semi-autonomous vehicles?

Many automobile insurance companies offer the possibility to monitor driving habits and distance driven by means of telematics devices installed in the vehicles. This provides a novel source of data that can be analysed to calculate personalised tariffs. For instance, drivers who accumulate a lot of miles should be charged more for their insurance coverage than those who make little use of their car. However, it can also be argued that drivers with more miles have better driving skills than those who hardly use their vehicle, meaning that the price per mile should decrease with distance...