Equity Valuation and Portfolio Management

2007 INTERTEK STUDY

The 2007 Intertek study, sponsored by the Research Foundation of the CFA Institute (now the Chartered Financial Analysts Institute), is based on conversations with asset managers, investment consultants, and fund-rating agencies as well as survey responses from 31 asset managers in the United States and Europe.¹⁵ In total, 12 asset managers and eight consultants and fund-rating agencies were interviewed and 31 managers with a total of $2.2 trillion in equities under management participated in the survey. Half of the participating firms were based in the United States; half of the participating firms were among the largest asset managers in their countries. Survey participants included chief investment officers of equities and heads of quantitative management and/or quantitative research.

A major question in asset management that this study focused on was if the diffusion of quantitative strategies was making markets more efficient, thereby reducing profit opportunities. The events of the summer of 2007, which saw many quantitatively managed funds realize large losses, brought an immediacy to the question. The classical view of financial markets holds that market speculators make markets efficient, hence the absence of profit opportunities after compensating for risk. This view had formed the basis of academic thinking for several decades starting from the 1960s. However, practitioners had long held the more pragmatic view that a market formed by fallible human ...