RADFORD – The work of two professors in the Radford University College of Business and Economics was recently selected for the Swisscanto Award for the Best Professional Paper in Financial Markets and Portfolio Management.

Steve Beach, associate professor of finance (top right), and Alex Orlov, associate professor of economics (bottom right), received the award for their article entitled, “An Application of the Black-Litterman Model with EGARCH-M-Derived Views for International Portfolio Management.”

Their research, which took 21 months to complete and first appeared in the June 2007 edition of Financial Markets and Portfolio Management, focuses on a portfolio allocation method known as the Black-Litterman model, which was developed at Goldman Sachs.

“We are the first researchers to present results with this model, over a time-series of investment periods, not only describing the methodology, but also showing that superior returns could be obtained using the method,” said Beach. Orlov and Beach chose a method known as EGARCH-in-Means “to generate estimates of returns and volatility, using past macroeconomic and country equity data to be input into the portfolio allocation model.”

Since its publication, Beach and Orlov have garnered much interest from portfolio managers and academics alike. “A former consultant in the Quantitative Strategies Group at Goldman Sachs and PhD students at three different universities have requested data or additional information as they work to replicate the results,” said Beach.

He and Orlov hope that people see the benefits of the cross-fertilization between real-world portfolio management and academic research. “The fact that this recognition is for research that is relevant to working professionals is very meaningful to us,” said Beach. “Personally, it is an honor that supports my belief that great teaching and significant research can be delivered at schools like Radford University. It is important to me that academics recognize the Radford name as an indication of quality. “

Other authors who have contributed to Financial Markets and Portfolio Management include Harry Markowitz and William Sharpe, Nobel Prize winners in economics and widely considered to be the founders of modern finance.

 The Swisscanto Award carries with it a cash prize of 4,000 CHF (approximately $3,673). A formal award ceremony is scheduled to take place at the Swiss Exchange in Zurich on April 11. The article written by Beach and Orlov is available online.