Diversification

Can crypto still help diversify an equity portfolio—or has that edge disappeared? That’s the practical question behind Crypto Contagion. The paper looks at how shocks move between crypto and U.S. equities, and more importantly, how that relationship changed after the launch of crypto ETFs. Instead of relying on simple correlations, the authors use a combination of jump detection (to isolate real stress events) and machine learning techniques to identify actual spillovers. By comparing periods before and after ETFs, they effectively show how the market structure—and with it, the behavior of crypto—has shifted .

Quantitative strategy research is rarely about discovering a single “perfect” trading rule. In practice, robust portfolios emerge from a structured research process that filters ideas, evaluates evidence, and combines complementary strategies.

To make the process concrete, we use value-based equity strategies as our working example. However, the goal of the article is not to identify the ultimate value strategy, but to illustrate how a systematic research workflow can be used to build a diversified portfolio of strategies around any investment hypothesis.

Calendar strategies are often viewed as weak when assessed individually. Their annualized returns tend to be low, market exposure is limited, and trading activity is sparse. Compared to trend following or swing strategies, which can remain invested for extended periods, calendar strategies may appear inefficient at first glance. This impression, however, largely stems from evaluating these strategies outside of their intended context. Calendar strategies are not designed to operate as standalone trading systems. Their primary role is within a portfolio, where their structural properties become relevant rather than their individual performance metrics.

Pragmatic Asset Allocation is a systematic, multi-asset investment strategy designed to adapt dynamically to evolving market conditions. Rather than maintaining a static equity exposure, the model actively allocates capital across a diversified set of asset classes—including equities, bonds, commodities, gold, and cash-like instruments—using momentum-based signals and disciplined periodic rebalancing. The strategy’s primary objective is to deliver attractive long-term returns while materially reducing drawdowns during adverse market environments.

It has now been two highly volatile years since we first published our paper on PAA, making this an opportune moment to review the strategy’s performance over the past year.

Market concentration has become one of the most discussed structural risks in today’s equity markets. A small group of mega-cap stocks—often the largest five to ten names—now accounts for an unusually large share of major market indices. This has led to widespread concerns that such concentration makes markets more fragile and that elevated index weights at the top may foreshadow weaker future returns. Many investors worry that history is repeating itself and that extreme concentration today implies disappointment tomorrow.

In Understanding Gold, Claude B. Erb and Campbell R. Harvey examine gold’s enduring reputation as a safe-haven asset and contrast popular narratives with empirical evidence. While gold has preserved purchasing power over millennia—what the authors call the “golden constant”—this does not translate into reliable short- or medium-term inflation hedging. Gold’s volatility is comparable to equities, while inflation itself is far more stable, making gold an unreliable hedge over typical investor horizons. The key insight is that gold’s real long-run return is approximately zero, which is precisely what one should expect from a hedging asset rather than a growth asset.