Research Aiming to Track Inflation Named 2023 Markowitz Award Winner

Researchers aiming to identify the economic variables that determine the future of inflation have been named recipients of the 2023 Harry M. Markowitz Award, awarded to the best paper published during the year by the Journal Of Investment Management.

The award, sponsored by JOIM and New Frontier Advisors, is intended to recognize the impact of Nobel Prize-winning economist Harry Markowitz’s work on theoretical finance and the practice of asset management. Markowitz, who passed away last June at the age of 95, is best known as the father of modern portfolio theory.

The award was also established to support research and innovation in practical asset management. Candidates for the annual award are chosen by the JOIM’s associate editors from the papers published in the JOIM in a calendar year. The final prize winners are chosen by Nobel Prize laureates, who are members of the JOIM’s advisory board. An honorarium of $10,000 is given to the winning paper, with two other papers receiving a special distinction award and a $5,000 honorarium.

The top award for 2023 was given to “The Determinants of Inflation,” by William Kinlaw, Mark Kritzman, Michael Metcalfe and David Turkington. The authors used a hidden Markov model to identify “regimes of shifting inflation” and used an attribution technique based on the Mahalanobis distance to identify the economic variables that determine the trajectory of inflation.

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The paper’s analysis is intended to allow policymakers to focus on the most effective tools to manage inflation and offers guidance to investors whose strategies could benefit from knowing the prevailing determinants of inflation. According to its analysis, the most important determinant of the recent spike in inflation was federal government spending.

The winners of the special distinction awards were “The Diminishing Role of Active Mutual Funds: Flows and Returns,” by James Xiong, Thomas Idzorek and Roger Ibbotson; and “Financing Fusion Energy,” by Abdullah Alhamdan, Zachery Halem, Irene Hernandez, Andrew Lo, Manish Singh and Dennis Whyte.

The authors of “The Diminishing Role of Active Mutual Funds” found in their research that U.S. active equity mutual funds have experienced net outflows since around 2006, If the current flow trend continues, the assets under management of active mutual funds will drop to 17% of the total AUM of equity funds after 15 years, according the paper.

“Financing Fusion Energy” made the case for investing in fusion energy, citing increasing global energy demand, high annual carbon dioxide output and the technological limitations of rivals wind and solar power’s. However, it also notes that financing for fusion companies through traditional means has been a challenge, citing high upfront costs, a lengthy delay in payoff and high risk of commercial failure.

The awards will be formally announced March 26 at the Spring JOIM Conference, which runs from March 24 through March 26 at the University of California, San Diego’s Rady School of Management.