On February 9, 2016, the Richman Center held a discussion, “Risk and Return in Today's World,” with Clifford S. Asness, Ph.D., Managing and Founding Principal at AQR. The event was moderated by Stephen P. Zeldes, Benjamin M. Rosen Professor of Finance and Economics at Columbia Business School, and focused on risk and return broadly, as well as its ties to strategy, behavioral finance, and arbitrage. Kicking off the discussion, Asness broke down the components of risk and investment in both short- and long-term capacities while assessing their benefits and uncertainties. By combining theoretical thinking and his experience in capital management at AQR, he offered a unique perspective on risk and offered insight into his approach to factor, style, and beta investing.

Asness’s views on choosing a formidable business partner—to some, the holy grail of investment strategies—and smart beta formed a strong basis for those wishing to gain steady footing in investing. Knowing when to monetize on good luck and when to use factor tilt versus kappa weighted portfolios, argued Asness, are what drive arbitrage. Asness also tapped into the Kelly criterion and its effectiveness in maximizing the logarithm of wealth as aggressive leverage while stressing the concomitant risks of such aggressive portfolios. In the final portion of his presentation, Asness delved into the realm of risk parity and discussed harnessing momentum.