Apply to be a research intern
In addition to providing us with your CV, please take the time to answer the following question. Please limit your answer to no more than 1000 words.
If you’re new to the finance industry, they will require some research – hopefully you’ll find it interesting!
Value is the phenomenon that assets, such as stocks and bonds, that have a lower price than based on a model, tend to outperform in the future. I.e., if an asset trades at 100, while the model thinks it should be 105, there is a 5% outperformance potential. The actual outperformance of the asset is usually different, and on average the realized outperformance is lower than the modelled price difference (i.e., the 5% here). Could you think of some reasons why the realized outperformance tends to be lower than the modelled outperformance, and how an investor can employ a Value strategy while minimizing the risk of underperforming?
Topics you might want to include in your discussion: the modelling assumptions used, the impact of the length of the horizon over which to measure outperformance and/or diversifying the risk.