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Professor Radu Tunaru

Professor Radu Tunaru of the University of Sussex Business School has been awarded the prestigious  Peter L. Bernstein Award for his paper on how dividend and volatility derivatives can enhance equity portfolio trading. The award, which honours the late Peter Bernstein, a renowned financial historian and author, is given annually by Portfolio Management Research to the best paper published across its 11 journals.

Professor Tunaru’s paper, titled “Equity Portfolio Trading with Volatility and Dividend Derivatives”, was published in the Spring issue of The Journal of Derivatives. In his paper, he shows how investors can use dividend and volatility derivatives to hedge against market risks, such as the Brexit vote in 2016, and to exploit market opportunities, such as the call spreads and calendar spreads strategies. Prof. Tunaru also demonstrates how portfolios that combine equity stocks, such as Euro STOXX 50, with dividend futures related to the same stock universe can achieve superior long-term returns, even in times of market crashes and downturns.

His research celebrates the 50th anniversary of the Black-Scholes formula, the cornerstone of finance, and introduces dividend and volatility derivatives as new tools for investment analysis. He shows how these derivatives can help investors hedge against market risks, such as the Brexit vote, and exploit market opportunities, such as the call spreads and calendar spreads strategies. He also reveals how portfolios that include dividend futures can outperform portfolios that rely on volatility futures or equity index alone.

Professor Tunaru, who is a professor of finance and risk management and Head of the Accounting and Finance Department at the Business School said:

“I am honoured to receive this prestigious award. This paper is an important piece in my research portfolio on dividend and volatility derivatives, which I believe are powerful tools for investment analysis. I hope that my paper will inspire more research and innovation in this field of research that connects equity derivatives, equity volatility derivatives and dividend derivatives in a novel way.”

The winner was chosen through a blind review process by an independent committee comprising Jennifer Bender (State Street Global Advisors), Joseph Davis (Vanguard) and Ronald Kahn (BlackRock). The judges looked for articles of both practical and academic relevance that took an original or new approach to the field or subject of study or provided surprising and insightful results or implications.

Ronald Kahn, one of the judges, said: “This year, we had many strong papers that lived up to Peter Bernstein’s desire for clear, well-written analyses of important investment topics. The winning paper demonstrates a compelling new use for dividend derivatives in hedging equity portfolios. The runner-up debunks several myths that can cloud our understanding of investing.”

The runner-up paper, titled “Debunking 7½ Myths of Investing”, was co-authored by Laurence Siegel, the Gary P. Brinson Director of Research for the CFA Research Foundation, and Stephen Sexauer, CIO of the San Diego County Employees Retirement Association. It was published in the Journal of Investing’s 30th Anniversary Special Issue.

The two papers beat over 500 published last year across Portfolio Management Research’s portfolio of 11 journals, which includes The Journal of Portfolio Management, the leading journal for practitioners and academics in the field of investment management.

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