Risk Management for Equity Asset Managers

  • 5 May 2011
  • By CME Group

The Power of Diversification in Equity Investing

This report describes how equity asset managers can use CME Group stock index products for managing risks and seizing opportunities in the current challenging marketplace. Specifically, the paper looks at portfolio diversification and reviews several popular stock index futures applications, including:

  • Beta adjustment
  • Cash "equitization"
  • Long/short strategies
  • Tactical rotation
  • Conditional rebalancing
  • Portable alpha strategies

It also provides a way to measure risk using the Capital Asset Pricing Model (CAPM), which describes how equity values fluctuate according to various economic forces driving the markets. This model also demonstrates the power of diversification in equity asset management.

The Risk Management for Equity Asset Managers is a technical report, written by CME Group research and equity staff.