Publications of Marie Lambert
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See detailCommentaires sur l'observatoire “Epargne et investissements”
Lambert, Marie ULiege

Conference given outside the academic context (2021)

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See detailL'industrie financière, un intermédiaire engagé
Lambert, Marie ULiege; Ruth, Jérôme ULiege

Article for general public (2021)

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See detailFactor Investing and the ARP Economic Cycle
Lambert, Marie ULiege

Conference (2020, October 09)

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See detailAgency costs of dry powder in private equity funds
Lambert, Marie ULiege; Scivoletto, Alexandre ULiege; Tykvova, Tereza

Scientific conference (2020, September 21)

The amount of non-invested capital in the private equity industry or “dry powder” has raised numerous concerns from public opinion. To obtain insight about the drivers of the dry powder development, we ... [more ▼]

The amount of non-invested capital in the private equity industry or “dry powder” has raised numerous concerns from public opinion. To obtain insight about the drivers of the dry powder development, we model the investment behavior of a fund sponsor as a function of their expected fees, the latter being a function of their expected returns as well as their profit-sharing agreement with limited partners (LP). Our empirical analysis is performed on 383 funds sponsoring 1,011 US LBO deals over the period 1980 – 2019. We first show that, consistently with the model, the fund management fees, the change in the fee basis computation towards the end of the investment period and the general partner’s (GP) expected return based on their track record and experience have a significant impact on the dry powder of the fund. Small funds, funds with low management fees or GP with a weak track record are more likely to have an abnormal level of dry powder at the end of the investing period. This situation leads to agency costs as we give evidence of the loss in performance for funds with abnormal dry powder at the end of the investing period. We find that high levels of dry powder lead to investment distortions where GPs focus more on maximizing their fees rather than maximizing the value for LPs. Deals undertaken at the end of the investing period by funds with a large volume of dry powder are under-leveraged, are larger and performed with less syndication to maximize the equity spent. They also present a significant lower cash on cash return. Key words: Dry powder, agency costs, private equity, LBO, investment distortions [less ▲]

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See detailCommentaires - Observatoire CBC de l’épargne et prévoyance 2020
Lambert, Marie ULiege

Conference given outside the academic context (2020)

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See detailFactoring Characteristics into Returns: A Clinical Study on the SMB and HML Portfolio Construction Methods
Lambert, Marie ULiege; Fays, Boris ULiege; Hübner, Georges ULiege

in Journal of Banking and Finance (2020), 114

Factor performance is highly sensitive to the number of stocks composing its long and short basis portfolios. We examine three methodological choices that have an impact on portfolio diversification: the ... [more ▼]

Factor performance is highly sensitive to the number of stocks composing its long and short basis portfolios. We examine three methodological choices that have an impact on portfolio diversification: the (in)dependence and the (a)symmetry of the stock sorting procedure and the sorting breakpoints. We show that these methodological choices have to be considered jointly and that a dependent (D) sort that starts with the control variables with whole sample or “name” (N) breakpoints and that performs a symmetric (S) sort on characteristics minimizes the biases from unpriced risks. This paper also demonstrates that the biases introduced by currently popular sorting methodologies can become very severe under specific market conditions and are not driven by small capitalizations. This alternative framework generates much stronger “turn-of-the- year” size and “through-the-year” book-to-market effects than what is conventionally documented. [less ▲]

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See detailStyle coverage in Institutional Media
Gillain, Cédric ULiege; Ittoo, Ashwin ULiege; Lambert, Marie ULiege

Poster (2020, January 17)

Since 2017, the number of listed indices has exceeded the number of listed firms in the US markets. Exchange traded funds have grown in popularity and represent a liquid way to get exposure to equity ... [more ▼]

Since 2017, the number of listed indices has exceeded the number of listed firms in the US markets. Exchange traded funds have grown in popularity and represent a liquid way to get exposure to equity style investing. This situation raises some concerns regarding investors’ limitations in processing information. Whereas investors benefit from financial research for individual listed firms, no channel of information covers style or factor investing. We examine the informational role of financial media targeting institutional investors with regard to style investing. We extract equity style coverage and sentiment from news targeting institutional investors. We further investigate news style coverage implication on mutual fund managers trading behavior and holdings. Our work extends the literature on investor attention to news with a special emphasis to equity style investments. [less ▲]

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See detailRisk optimizations on basis portfolios: The role of sorting
Fays, Boris ULiege; Papageorgiou, Nicolas; Lambert, Marie ULiege

E-print/Working paper (2020)

This paper investigates the mean-variance and diversification properties of risk-based strategies per- formed on style or basis portfolios. We show that the performance of these risk strategies is ... [more ▼]

This paper investigates the mean-variance and diversification properties of risk-based strategies per- formed on style or basis portfolios. We show that the performance of these risk strategies is improved when performed on portfolios sorted on characteristics correlated with returns and is highly sensitive to the sorting procedure used to form the basis assets. Whereas the extant literature provides mixed support for the outperformance of smart beta strategies based on scientific diversification, our de- signed strategies outperform both the market model and multifactor model. Our testing framework is based on bootstrapped mean-variance spanning tests and shows valid conclusions when control- ling for multiple testing, transaction costs, and luck from random basis portfolio construction rules. Economically, our results are supported by diversification-based properties. [less ▲]

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See detailThe Seasons of the True Size Anomaly
Fays, Boris ULiege; Hübner, Georges ULiege; Lambert, Marie ULiege

E-print/Working paper (2020)

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See detailThe macroeconomic drivers in hedge fund beta management
Lambert, Marie ULiege; Platania, Federico

in Economic Modelling (2020), 91

We investigate how macroeconomic indicators alter the dynamic risk exposure of different hedge fund style strategies. We implement a multifactor model to estimate the unobservable time-varying risk ... [more ▼]

We investigate how macroeconomic indicators alter the dynamic risk exposure of different hedge fund style strategies. We implement a multifactor model to estimate the unobservable time-varying risk exposure conditional to macroeconomic information and a VAR to measure the impact of macroeconomic predictors on different time horizons. Using monthly returns on a cross-section of 10 different style indices from February 1997 to August 2019, we find that, on average, macroeconomic indicators explain approximately 30\%, 55\%, and 75\% variability of betas at 1-, 6-, and 36-months horizons, respectively. Although macroeconomic predictors play a critical role at every horizon, at 1-month the dominating effect comes from idiosyncratic shocks, which indicates that in the short run hedge fund managers mostly rely on their own reallocation signals. Moreover, consistent with the fundamental drivers of the smart beta factors, we find that interest rate level and GDP growth similarly impact hedge fund exposures across styles. [less ▲]

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See detailNews-induced style seasonality
Gillain, Cédric ULiege; Ittoo, Ashwin ULiege; Lambert, Marie ULiege

Conference (2019, June 17)

This paper posits a new methodological approach to test how specialized media could influence the information transmission channels towards investors. We contribute to the literature on the role of media ... [more ▼]

This paper posits a new methodological approach to test how specialized media could influence the information transmission channels towards investors. We contribute to the literature on the role of media on investor limited attention, on seasonal effects in market anomalies and on the impact of news on market anomalies. Our approach is somewhat different from the current literature as we determine whether we can detect any seasonality in the news coverage of recommendations, analyses or opinions on investment styles provided by specialized press to institutional investors. Our paper not only contributes to the literature on market anomalies and seasonality effects in financial markets but also aligns itself with a new strand of research involving the application of text mining in finance. First, our text corpus gathers articles from specialized press targeting institutional investors. Such a corpus is unique and has never been investigated. Second, we build our own dictionaries from several statistical methods to extract style information from news flow. The method is innovative and our study is the first to investigate the seasonality in the underlying information channel. At this stage, the paper is mainly methodological and centered on small and large styles. Results will be extended to other investment styles in the near future and completed with statistical test of cyclicality and trend analysis. [less ▲]

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See detailLooking for the Tangent Portfolio: Risk Optimization Techniques on Equity Style Buckets
Lambert, Marie ULiege

Scientific conference (2019, February 21)

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See detailLooking for the Tangent Portfolio: Risk Optimization Techniques on Equity Style Buckets
Lambert, Marie ULiege

Scientific conference (2019, February 07)

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See detailOn the Importance of Factor Construction and Methodology Choice
Lambert, Marie ULiege

Conference (2018, November 06)

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See detailThe impact of external market conditions on real options valuation
Lambert, Marie ULiege

Conference (2018, March 27)

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See detailSmart Equity Investing: Implementing Risk Optimization Techniques on Strategic Beta Portfolios
Fays, Boris ULiege; Lambert, Marie ULiege; Nicolas, Papageorgiou

E-print/Working paper (2018)

We examine the performance of risk-optimization techniques on equity style portfolios. To form these portfolios, also called Strategic Beta factors by practitioners and data providers, we group stocks ... [more ▼]

We examine the performance of risk-optimization techniques on equity style portfolios. To form these portfolios, also called Strategic Beta factors by practitioners and data providers, we group stocks based on size, value and momentum characteristics through either independent or dependent sorting. Overall, performing risk-oriented strategies on style portfolios constructed with a dependent sort deliver greater abnormal returns. On average, we observe these strategies to significantly outperform 42% of the risk-oriented ETFs listed on US exchanges, compared to 31% when the risk-oriented strategies are performed on portfolios formed with an independent sort. We attribute the outperformance yielded by dependent sorting to the fact that it provides a better stratification of the set of stocks’ opportunity and diversification properties. [less ▲]

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See detailFactoring Characteristics into Returns: A Clinical Approach to Fama-French Portfolio Decomposition
Lambert, Marie ULiege; Fays, Boris ULiege; Hübner, Georges ULiege

E-print/Working paper (2018)

This paper thoroughly analyzes competing construction methods for factoring characteristics into returns. We show the importance of ensuring a proper diversification of the factor's portfolio constituents ... [more ▼]

This paper thoroughly analyzes competing construction methods for factoring characteristics into returns. We show the importance of ensuring a proper diversification of the factor's portfolio constituents for producing relevant and unbiased risk factors or benchmark portfolios. This is an important issue to be solved for asset pricing and performance models defined as a function of characteristics. As a practical case, the paper works on the design of size and value spread portfolios à la Fama-French. This quasi- clinical investigation examines three methodological choices that have an impact on portfolio diversification: the (in)dependence and the (a)symmetry of the stock sorting procedure, and the sorting breakpoints. A sequential and symmetric sort of stocks into long and short portfolios conditioned on control variables produces unbiased factors. Our results are stronger when whole firm samples are used to define breakpoints and are also robust to the inclusion of a third dimension in the multiple sorting. [less ▲]

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See detailGamma Trading Skills in Hedge Funds
Fays, Boris ULiege; Hübner, Georges ULiege; Lambert, Marie ULiege

E-print/Working paper (2018)

This paper explores the gamma trading, timing and managerial skills of individual hedge funds across categories. We replicate the non-linear payoffs of hedge funds with traded options, with the option ... [more ▼]

This paper explores the gamma trading, timing and managerial skills of individual hedge funds across categories. We replicate the non-linear payoffs of hedge funds with traded options, with the option features being endogenously defined in our replication model. On top of providing a flexible tool to create individual benchmarks for the payoff curvature of hedge fund, the model helps assigning hedge fund styles into three categories: directional with market timing skills, non-directional and market timers. Overall, our empirical results show that, on 30% of replicated funds in our sample (10,958 funds), there is no evidence of the presence of selection skills once a fund performance is adjusted with respect to the option-based benchmark and the traditional option-based factors of Agarwal and Naik (2004). This research has an incremental potential to stimulate additional research in the field of hedge funds performance replication through passive strategies. [less ▲]

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See detailMoral Hazard in High-Risk Environments: Optimal Follow-on Investing in Venture Capital Finance
Tennert, Julius; Lambert, Marie ULiege; Burghof, Hans-Peter

in Venture Capital (2018), 20(4), 323-338

This paper examines the joint effect of environmental risk and moral hazard on staging activity in venture capital financing. We show theoretically and empirically that venture capitalists face a trade ... [more ▼]

This paper examines the joint effect of environmental risk and moral hazard on staging activity in venture capital financing. We show theoretically and empirically that venture capitalists face a trade-off between a) deferring and staging investments to engage in learning of the risky venture and avoid downside losses and b) committing additional funds to update the incentive of the entrepreneur. We describe this trade-off through the timing of follow-on investments and show that highly qualified entrepreneurs demand greater compensation (a larger share) than do less qualified entrepreneurs in situations of high risk. [less ▲]

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