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The ABC’s of the ARP: understanding alternative risk premium

Author

Listed:
  • Stephen A. Gorman

    (Wellington Management)

  • Frank J. Fabozzi

    (EDHEC Business School)

Abstract

Alternative risk premium (ARP) has experienced significant growth as an investment category in recent years. While considerable educational efforts accompanied this growth, gaps and misunderstandings persist. This paper provides a detailed definition of and contextualization of ARP as well as a comprehensive review of its academic roots, explaining that ARP sits at the confluence of decades of research on empirical anomalies, hedge fund replication, multi-factor models and data snooping.

Suggested Citation

  • Stephen A. Gorman & Frank J. Fabozzi, 2021. "The ABC’s of the ARP: understanding alternative risk premium," Journal of Asset Management, Palgrave Macmillan, vol. 22(6), pages 391-404, October.
    • Handle: RePEc:pal:assmgt:v:22:y:2021:i:6:d:10.1057_s41260-021-00231-3
    DOI: 10.1057/s41260-021-00231-3
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    References listed on IDEAS

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    3. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    4. Lasse Heje Pedersen, 2015. "Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined," Economics Books, Princeton University Press, edition 1, number 10441.
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