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

Conference given outside the academic context (2020)

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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 detailThe earnings-announcement-day news puzzle
Lambert, Marie ULiege; Moreno Miranda, Nicolas ULiege

Poster (2020, January 17)

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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 detailPrivate Equity and Employee Welfare
Lambert, Marie ULiege; Moreno Miranda, Nicolas ULiege; Phalippou, Ludovic

E-print/Working paper (2020)

Employees give lower ratings to their companies following a Private Equity Leveraged Buy-Out (PE/LBO) transaction. The analysis of ten million ratings on di erent well- being aspects and of thousands of ... [more ▼]

Employees give lower ratings to their companies following a Private Equity Leveraged Buy-Out (PE/LBO) transaction. The analysis of ten million ratings on di erent well- being aspects and of thousands of written comments, indicates that the cause is likely to stem from the di erent management style of PE-owned companies. Ratings decrease much less, or at all, for employees i) who are in management positions, ii) whose company was already PE-owned before (only changed owner), iii) whose company was acquired by a non-PE rm or went public, iv) who do not mention PE in their reviews. Ratings of company culture and of management are those decreasing the most. The words culture and management are those most frequently mentioned in negative comments. These results indicate that LBO transactions exacerbate a gap between the welfare of management and that of the rest of the employees, which we show exist across all companies. [less ▲]

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

in Economic Modelling (2020)

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 detailAgency costs of dry powder
Lambert, Marie ULiege; Scivoletto, Alexandre ULiege; Tykvova, Tereza

E-print/Working paper (2020)

About $2tn has been raised but have not yet been invested in private equity funds. This amount of non-invested capital or “dry powder” has raised numerous concerns regarding potential pressure to invest ... [more ▼]

About $2tn has been raised but have not yet been invested in private equity funds. This amount of non-invested capital or “dry powder” has raised numerous concerns regarding potential pressure to invest in low-quality companies for these funds with adverse consequence on fund performance. We model the total fee revenue (management fee and carried interest) collected by a private equity sponsor as a function of committed capital, net invested capital as well as the risk and return of the fund investments. We show that higher deal expected returns and higher management fees as associated with a stronger pressure on dry powder. On the other hand, an increase in the carried interest or the existence of a valuable option to delay investment to benefit from better opportunities reduce this pressure. We run an empirical analysis using 12,779 leveraged buyout deals from the US over the period 1980 – 2019 that supports our predictions from the theoretical model. Moreover, dry powder pressure is associated with investment distortions. It leads to inflated deal prices, lower returns and lower leverage. [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 detailExtremal connectedness and systemic risk of hedge funds
Mhalla, Linda; Hambuckers, Julien ULiege; Lambert, Marie ULiege

E-print/Working paper (2020)

We propose a dynamic measure of extremal connectedness across investment styles of hedge funds. Using multivariate extreme value regression techniques, we estimate this measure conditional on factors ... [more ▼]

We propose a dynamic measure of extremal connectedness across investment styles of hedge funds. Using multivariate extreme value regression techniques, we estimate this measure conditional on factors reflecting the economic uncertainty and the state of the financial markets, and derive several systemic risk indicators. Empirically, we study the dynamics of tail dependencies between investment strategies in the HFR database. We show that during crisis periods, some pairs of strategies display an increase in their extremal connectedness. Our results highlight that a proactive regulatory framework should account for the dynamic nature of the tail dependence and its link with financial stress [less ▲]

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See detailThe earnings-announcement-day news puzzle
Lambert, Marie ULiege; Moreno Miranda, Nicolas ULiege

Conference (2019, December 16)

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

Scientific conference (2019, December 05)

Detailed reference viewed: 27 (5 ULiège)
See detailTail risk and style dependence in the fund industry: a multivariate extreme value approach
Hambuckers, Julien ULiege; Mhalla, Linda; Lambert, Marie ULiege

Conference (2019, December)

Detailed reference viewed: 35 (7 ULiège)
See detailProcessus d'acquisition d'une entreprise privée: mise en contexte et sujets de recherche actuels
Lambert, Marie ULiege

Conference given outside the academic context (2019)

Detailed reference viewed: 46 (4 ULiège)
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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 detailTail risk and style dependence in the fund industry: a multivariate extreme value approach
Mhalla, Linda; Hambuckers, Julien ULiege; Lambert, Marie ULiege

Scientific conference (2019, June)

Detailed reference viewed: 25 (1 ULiège)
See detailLooking for the Tangent Portfolio: Risk Optimization Techniques on Equity Style Buckets
Fays, Boris ULiege; Lambert, Marie ULiege; Papageorgiou, Nicolas

Conference (2019, June)

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See detailValuation and acquisition finance
Lambert, Marie ULiege

Conference given outside the academic context (2019)

Workshop Valorisation et financement d’une acquisition Cet atelier aborde les questions de valorisation et de structure du capital dans les cas particuliers de fusions, acquisitions ou de transactions ... [more ▼]

Workshop Valorisation et financement d’une acquisition Cet atelier aborde les questions de valorisation et de structure du capital dans les cas particuliers de fusions, acquisitions ou de transactions impliquant des investisseurs financiers. Les orateurs présenteront les notions de base en matière de valorisation, les déterminants de la valeur d’une entreprise et de ce type de transactions. Ils partageront leur expertise sur les questions spécifiques liées à la valorisation de ces fondamentaux lors du processus d’évaluation de la société cible ainsi que de la modélisation de la structure du capital. [less ▲]

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

Conference (2019, May)

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