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BUILDING SOCIETY EXCELLENCE
CFA Institute and CFA Society network are leaders in providing in-depth insights about the investment world of today and what that means for the industry of tomorrow. Here is a glimpse at what we’re working on now and into the future. Dates are subject to change.
April 2024
In Market
This paper is intended to help both investment professionals and retail investors assess data sources and integrate climate-related risk and opportunities in their investment process.
Theme: Sustainable Investing
Mean–variance portfolio optimization focuses solely on risk and return, neglecting non-financial objectives, such as sustainability. The authors introduce mean–variance-sustainability optimization and demonstrate its efficacy empirically.
Create a community in the CFA Institute Community platform (powered by Higher Logic) for our GIPS Standards Sponsors to enhance engagement and facilitate resource sharing.
This report examines current issues European companies face when it comes to raising capital and accessing primary markets and what regulators could do to encourage organizations to operate more in equity markets. The findings have relevance for the EU’s ongoing review into its capital market structures and capital markets union initiative.
Theme: Resiliency of the Capital Markets
This study investigates how optimal allocations to equities, value and small factors, and commodities have changed across different holding periods using historical time series data.
May 2024
The report covers unstructured and alternative data types and use cases. It reviews fine-tuning methods used in NLP models designed to work with unstructured and alternative data and synthesizes the methods into a case study on ESG data.
Theme: Data Analytics, Technology, and Automation
This review critically synthesizes the academic literature on private equity, spotlighting its performance and track record of value creation. It also examines crucial aspects of private equity investing relevant to investors forming and managing their fund portfolios.
The authors present a method for optimally hedging climate risk that incorporates new methodologies for estimating large-dimensional covariance matrices in short sample. The enhanced method is shown to be more efficient than traditional approaches.
June 2024
Public policy statement on Net Zero to accompany release of the paper “Net Zero in the Balance”
Using 1964–2023 data for the largest 1,000 US stocks, this study analyzes nonlinear return-to-characteristic relationships for five factors: value, momentum, small size, low beta, and profitability.
Testing the predictive performance of machine-learning methods in estimating the illiquidity of U.S. corporate bonds, this study finds that such techniques outperform the most common benchmark. Additional techniques can enhance this performance.
This report explores the current issues around gender globaly and demonstrates how our program aims to tackle these issues. The report also outlines the purpose, structure and outcomes of the YWI Program.
To improve accuracy for estimating long-term expected returns, this study evaluates different estimation frameworks and input proxies within each framework.
This study examines promotion dynamics in Australia's financial services, revealing gender disparities where women receive fewer unsolicited promotions than men but achieve higher success rates when seeking promotions.
This report discusses the global need for transformational changes to achieve net zero, highlighting the substantial financial challenge of financing this transition over the next three decades.
This report delves into the increasing importance of governance in private markets amidst shifting financial landscapes. It also presents findings from a global survey of CFA Institute members regarding their attitudes and practices related to private markets.
European Adaptation of the CFA DEI Code and Implementation Guidance.
July 2024
This paper introduces a novel corporate bond transaction cost measurement approach to evaluate net-of-cost returns of systematic bond investments and to determine which strategies remain the most profitable as fund size increases.
This report will analyze the EU regulatory framework on sustainable finance, propose solutions for ESG risks, and provide recommendations to improve ESG investing policies while ensuring investor protection.
This article will cover a practical correction method proposing a heuristic Z transformation to assess probabilities of left-tail events in equity returns, demonstrating improved assessments for Z statistics lower than –1.
This paper provides a rationale and a simple framework for applying ESG screens to portfolios that include derivatives.
Full issue PDF of the third quarter 2024 issue of the Financial Analysts Journal.
Theme: Future of the Profession
The objective of this paper is to reexamine ways to define indexing and to develop a taxonomy of indexing as conditions are changing in the investment industry.
When a 1974 FAJ article denied the relevance of earnings per share as the central metric of equity analysis, it spurred more research on sources of equity value, creating the wider set of valuation tools used today.
CFA Institute and the IAA surveyed investment firms to identify common practices for complying with the performance requirements of the SEC Marketing Rule. The findings should help firms assess and refine their advertising policies.
August 2024
Target Release: August
This project aims to integrate a network-based general valuation model into the TRISK climate stress testing model. A general valuation framework proposed by Barucca (2020) will be used to model the network contagion effects.
Section I of this paper serves as a primer on tokenization of assets and its use cases on different markets.
For almost three quarters of a century, lifecycle finance models and mean–variance optimization remained separate, but recent breakthroughs have produced combined models that answer critical financial planning questions linked to portfolio choice.
September 2024
Target Release: September
Provides guidance for establishing policies and procedures for handling trade errors.
Creates principles for calculating and reporting attribution.
Conduct a survey of asset owners for compliance with the GIPS standards and issue a report on the survey results.
Common methods of using machine learning to predict cross-sectional stock returns can lead to suboptimal results. This study proposes two strategies that offer economic improvements.
Examining the impact of expectations for cash flow, discount rates, inflation, and earnings growth, this study finds novel evidence of time-varying roles.
October 2024
Target Release: October
The study delves into the performance of stocks and bonds across different periods, revealing that the correlation between these asset classes is neither static nor consistently negative. This has significantly influenced the dynamic performance of the 60/40 portfolio over the past 122 years.
This paper will develop our BITS framework, summarize existing contributions, address key business challenges for investors and asset owners, suggest pathways forward, deepen stakeholder dialogue, and inform future research and educational initiatives.
Applying a novel model to a proprietary dataset, this study estimates that financial intermediation costs impose a meaningful drag on investor returns.
This piece discusses investor survey findings and other perspectives on the accounting for intangible assets.
This project will provide guidance and resources for investment professionals to better understand the global carbon markets and then employ them as an effective tool for advancing and achieving net zero goals.
This paper employs a general network valuation model to analyze financial contagion under climate transition risk, highlighting higher average losses in smaller economies due to spillover effects from larger ones.
November 2024
Target Release: November
This report undertakes a thorough examination of the 60/40 investment strategy's ability to sustain retirees through their post-working years, with a focus on the diverse economic environments of Australia and the United States.
This project will examine the state of the voluntary carbon markets, assess policy issues, and address implementation challenges to enhance market integrity, functionality, and transparency, crucial for its role in climate finance.
This report will identify where in the value chain new AI technologies can be implemented to enhance the overall value proposition for investors.
This paper examines the rising market share of index funds, fund fees, and the drivers of active management in US and European markets over different regimes. The analysis provides an examination of the response of active funds to competition from index funds, economic conditions, and market volatility through descriptive statistics and an empirical analysis of the drivers of active share.
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