In this paper we use skewness and co-skewness to major risk factors to quantify where assets and strategies fall in the productive-scarce spectrum. Empirically investigating over a hundred investable assets in 1973-2022, we observe that intuitively productive assets tend to be concave, i.e. have negative skewness and negative coskewness with respect to the major risk factors. By contrast, assets such as gold, “safe” government bonds, and reserve currencies have to be intuitively scarce to be convex, i.e. have positive skewness and positive coskewness with respect to major risk factors.

Alternative assets considered include fast momentum strategies which derive their convex profile from a scarcity of liquidity. Further, from the 4×4 Asset Allocation perspective, productive assets provide exposure to nominal GDP growth, while diversifying with scarce assets is key for resilience in recessionary and inflationary environments, improving empirical performance.

Presenter Bios:

MAX GOLTS

Max Golts is the Chief Investment Officer at 4x4invest, LLC, an asset management startup employing a goal-based, quantitative, systematic approach to global asset allocation, portfolio construction, analysis and completion. Previously, Max was a portfolio manager at Acadian Asset Management, a strategist at SSGA and Fidelity Investments, and a senior research analyst at GMO. Max holds a Ph.D. degree in mathematics from Yale University.

GREGORY JONES

Greg Jones, PhD, Advisory Board Member at 4x4invest, LLC. Previously, he was a partner at GMO, where he served in multiple roles including portfolio management, head of quantitative research and business development. Greg holds a Ph.D. degree in physics from Harvard University.