Kathy Valentine
CFA Institute - North America
434-951-5348
kathy.valentine@cfainstitute.org
Jessica Galehouse
CFA Institute - North America
434-951-5376
jessica.galehouse@cfainstitute.org
Graham And Dodd Award For Best Financial Analysts Journal Article Of 2005 Presented to John Y. Campbell And Luis M. Viceira
Charlottesville, Va., March 22, 2006 — John Y. Campbell and Luis M. Viceira received the prestigious Graham and Dodd Award for their article “The Term Structure of the Risk-Return Trade-Off,” the Financial Analysts Journal announced today.
Awarded by the FAJ’s advisory council and editorial board, the Graham and Dodd Award for excellence in research and financial writing is the publication’s highest honor. The FAJ is published six times a year by CFA Institute, the worldwide association of more than 80,000 securities analysts, portfolio managers, strategists, consultants, and other investment specialists. The journal advances the knowledge and understanding of the practice of investment management through the publication of high-quality, practitioner-relevant research.
The article, published in the January/February 2005 issue, shows how expected excess returns on bonds and stocks, real interest rates, and risk shift over time in predictable ways and tend to persist for long periods. Changes in investment opportunities can alter the risk-return trade-off of bonds, stocks, and cash across investment horizons, thus creating a “term structure” of the risk-return trade-off. This term structure can be extracted from a parsimonious model of return dynamics, as is illustrated with data from the U.S. stock and bond markets.
Campbell is the Otto Eckstein Professor of Applied Economics at Harvard University, Cambridge, Mass. Viceira is an associate professor at the Harvard Business School, Boston.
The Graham and Dodd Award was created in 1960 to honor the enduring contributions of Benjamin Graham and David L. Dodd to the investment analysis field. Each year it is presented to the author or authors of the most outstanding FAJ article. In 2005, Richard Roll, the University of California’s Anderson School of Management Japan Alumni chair in International Finance, received this prestigious recognition for his article “Empirical TIPS.” Other past recipients include industry leaders Peter L. Bernstein, William F. Sharpe, Fischer Black, and Charles D. Ellis, CFA.
The FAJ advisory council and editorial board also awarded three “Graham and Dodd Scroll Awards” to recognize additional outstanding articles published in 2005.
The three Scroll Award articles are:
- “Performance Attribution and the Fundamental Law” (September/October 2005) by Roger Clarke, chairman of Analytic Investors, Inc., Los Angeles; Harindra de Silva, CFA, president of Analytic Investors, Inc., Los Angeles; and Steven Thorley, CFA, the H. Taylor Peery Professor of Finance at the Marriott School, Brigham Young University, Provo, Utah. The study indicates that parameters of the fundamental law can be used to approximate and interpret the results of the regression-based performance attribution system.
- “Practical Issues in Forecasting Volatility” (January/February 2005) by Ser-Huang Poon, professor of finance at the University of Manchester, United Kingdom, and Clive Granger, professor emeritus and research professor at the University of California at San Diego, and winner of the 2003 Nobel Prize in Economics. The survey found that option-implied volatility provides more accurate forecasts than time-series models. Among the time-series models, no model is a clear winner, although a possible ranking is as follows: historical volatility, generalized autoregressive conditional heteroscedasticity, and stochastic volatility.
- “A Delegated-Agent Asset-Pricing Model” (January/February 2005) by Bradford Cornell, professor of finance at the Anderson Graduate School of Management, University of California at Los Angeles, and Richard Roll, who holds the Japan Alumni Chair in Finance at the Anderson Graduate School of Management, University of California at Los Angeles. Today, most investors delegate major investment decisions to financial professionals. This suggests that the instructions given by investors to their delegated agents and the compensation of those agents might be important determinants of capital market equilibrium.
The Best Perspectives Award, which recognizes the timeliest and most thought-provoking opinion article, was presented to Burton Malkiel, Chemical Bank Chairman's Professor of Economics at Princeton University, New Jersey, and Atanu Saha, managing principal at Analysis Group, New York City, for their article “Hedge Funds: Risk and Return” (November/December 2005). The authors conclude that hedge funds are riskier and provide lower returns than is commonly supposed.
“Rubble Logic: What Did We Learn from the Great Stock Market Bubble?” (November/December 2005) by Clifford S. Asness, founding and managing principal at AQR Capital Management, LLC, New York City, won the Reader’s Choice Award. Asness reflects on the peak of the Great Stock Market Bubble of 1999–2000 and suggests that if lessons were not learned then, they should have been.
Asness was the winner of the 2003 Graham and Dodd Award for his article with Robert D. Arnott “Surprise! Higher Earnings — Higher Earnings Growth.” He also won the 2004 Best Perspectives Award for “Stock Options and the Lying Liars Who Don’t Want To Expense Them.”
During 2006, all of the award winning articles can be accessed online at no cost.
Last year, the FAJ celebrated its 60th anniversary by publishing in each issue “reflections” pieces written by specially invited authors including Abby Joseph Cohen, CFA, John C. Bogle, and Gary P. Brinson, CFA. The hard-bound anthology, Bold Thinking on Investment Management, can be ordered online.
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