Professional stuff

Random useless information from Ken's careers in academia and in the real world

Bios and stuff

Kenneth F. Kroner
Retired Senior Managing Director, Global Head of Multi-Asset Strategies, Global Head of Scientific Active Equities

Kenneth F. Kroner, PhD, retired from BlackRock in 2016. As a Senior Managing Director at BlackRock, he was global head of Multi-Asset Strategies and global head of Scientific Active Equities. These teams were responsible for several hundred billion dollars of active investment strategies. Ken also served as a member of BlackRock’s Global Executive Committee and BlackRock’s Global Operating Committee.

Ken worked with BlackRock and its predecessor organizations (including Barclays Global Investors, or BGI) from 1994 through 2016. At BGI he oversaw asset allocation (which included global macro, active currencies and active commodities), fund of hedge funds and client solutions. Prior to joining BGI in 1994, Dr. Kroner was an associate professor of economics and finance at the University of Arizona.

Dr. Kroner serves or has served on various academic boards, foundation boards and academic journal editorial boards. His research on forecasting volatility and asset returns has been widely published in both academic and practitioner journals. Dr. Kroner earned a BA degree in mathematics and economics from the University of Alberta and a PhD in economics from the University of California at San Diego.

The term CV refers to "curriculum vitae" which is a fancy word for an academic resume.

Ken's CV

Press releases, articles and the like

Because of BLK's size and influence, we were the target of academics who were trying to make a name for themselves. In 2015, the Economist reported on one academic article that claimed to show that BLK was the cause of various market anomolies (explain). BLK asked me to write a letter to the Economist, which appeared in the XXX issue, to rebut their findings. Truth is, the research was a little shoddy, so it wasn't hard to identify what they did wrong.

Economist letter to Editor

BlackRock's stock pickers were struggling for a few years, and in 2015 Larry Fink (CEO) decided to lean on Ken's team's "big data" capabilities to pull them through. Here's the news article.

BlackRock betting on big data

When BlackRock and Ken decided it was time to retire, this was the 2016 press release that went out. Essentially, they split Ken's role into two, gave half to his good friend Rich Kushel and the other half to his long-time mentees Raffaele Savi and Jeff Shen. Good move for BLK.

BLK departure

A standard press release on Ken's appointment (with Phyllis Clark) to AIMCo's board

AIMCo board announcement

My boss, Richard Grinold, and I wrote a paper on how to measure/forecast the long-run expected stock market return. The model has come to be known as the Grinold/Kroner model. (There's more on this, including the article itself, in the panel to the right under "The equity risk premium.")

Someone created a short Wikipedia page on the article. Here's the link.

Grinold/Kroner Wikipedia link

In this video blog, I talk about an investment-related lesson I learned from making a stupid investment decision. (Not sure how long BlackRock will keep this blog series live.)

Blinded by the light

Random UCSD stuff

Triton Magazine gets sent to UCSD's 175,000 alumni on a quarterly basis. This 2017 issue includes a brief article introducing Ken as the chair of the capital campaign.

Triton Magazine

Blurb in the annual report

UCSD 2016 annual report

Ken became a trustee at UC San Diego in about 2009. Here's the bio that they are using. It's mostly (but not completely) accurate.

Trustee bio

In 2015, I was honored as a UCSD "distinguished alumnus," along with the much more well-known Michael Judge (created TV shows Beavis and Butthead and Silicon Valley, and movies like Office Space). The creators of Wong Fu Productions, whose YouTube channel has millions of followers, were also recognized. Our kids were much more excited to meet the Wong Fu guys than to see their dad on stage.

This is the announcement of the event, along with the 3-minute acceptance speech that I gave. My brother Daryl and I prepped this over drinks in La Jolla that afternoon. I remember the preparation better than the presentation.

Acceptance speech (warning...3:04 minutes, 97MB)

Another UCSD speech, this one in my capacity as the Chair of UCSD's $2b capital campaign. Warning....this starts with an introduction that's almost as long as my speech. It's a rah-rah speech to a group of UCSD supporters at the USS Sally Ride research Vessel launch party in San Diego.

Campaign speech (6:01 minutes, 191MB)

I gave the grad college commencement address in 2009. In that address, I presented three pieces of advice that I didn't know when I graduated with my Ph.D.:   I covered the importance of hair color, the importance of liking what you do, and the importance of relationships.

Commencement address

Sampling of academic papers written

This is the second chapter of my Ph.D. dissertation, co-authored with my advisor Nobel Laureate Rob Engle. It's a purely theoretical econometrics paper that extended Rob's univariate work (predicting volatility of a single asset) to a multivariate context (predicting volatility and interrelationships of several assets).

Interesting anecdote: It took about seven years to get this paper published because it took that long for me to figure out how to fix an error that the referee found. (The referee was very good.) While awaiting publication, the paper became notorious for being one of the most heavily cited unpublished papers in the field. I was almost sad to see it published.

Econometric Theory, 1995

This paper, coauthored with classmates Tim Bollerslev and Ray Chou, surveyed the volatility modeling literature.

Interesting anecdote: As of the late 1990s and early 2000s, this was one of the 100 most influential papers in the history of the social sciences (as measured by citations). It's probably since been surpassed by many other papers.

Interesting anecdote: The French translation had an additional coauthor. We included him on the translation as a reward for helping get this paper off the ground.

Interesting anecdote: This paper was reprinted twice. Once in Volatility: New Techniques for Pricing Derivatives and Managing Financial Portfolios (edited by Robert Jarrow), Risk Publications 1998. And the second in Recent Developments in Time Series (edited by Paul Newbold and Stephen Leybourne): Edward Elgar Publishing, 2003

Journal of Econometrics, 1992
Annales D'Economie et de Statistique, 1991

This paper, coauthored with my boss Richard Grinold, gives a framework for forecasting long-run stock market returns (the "equity risk premium"). The paper then applies the framework to show that equities should outperform bonds by about 3% to 3½% over the long run.

Interesting anecdote: This paper is easily my most-read and most-studied paper. Every CFA candidate from about 2002 to 2016 (and maybe still today...I don't know) had to study this paper, because it was on the CFA level 3 exam virtually (if not literally) every year. This means that about 100,000 finance professionals since 2002 had to learn its key concepts in order to get their professional CFA certification, and explains why there are a number of web pages that help students understand this model.

Interesting anecdote: Someone created a short Wikipedia article on the model. The link to this article is included in the "Press releases, articles and the like" panel to the left.

Investment Insights, 2002
Version updated by Larry Siegel

Being able to forecast the future value of a currency (or commodity or stock or any other security) would be the Holy Grail in investing. Therefore, hundreds of papers were written to test whether information from the futures markets provides accurate forecasts of currency prices (or commodity prices or stock prices). This was a popular research topic both because it's pretty important and because everyone was getting different results, depending on how they conducted their tests. Robin Brenner and I applied the then-new concept of Cointegration to show theoretically why everyone got the results they were getting.

Interesting anecdote: This paper won a Financial Management Association "best paper" award when it was written.

Interesting anecdote: One of my Ph.D. advisors, Clive Granger, eventually won the Nobel Prize for developing the concept of Cointegration. This paper demonstrated just how relevant Clive's work was.

Journal of Financial and Quantitative Analysis, 1995

Stock market risk changes over time, both because the risk of each underlying stock changes over time, and because the stocks sometimes move together and sometimes move apart. For example, Google and Facebook risk are each time-varying, and sometimes one is zigging while the other is zagging but sometimes they both zig and zag together. Modeling these dynamic behaviors is so important that many different ways to do it were developed (one in my Ph.D. dissertation). In geek-speak, there were eventually several ways to parameterize multivariate volatility models, each with slightly different properties. The papers below, written with classmate Victor Ng, developed a novel way to compare and contrast the models, showing that each is appropriate for different purposes.

Interesting anecdote: The JASA paper was reprinted in the book Volatility: New Estimation Techniques for Pricing Derivatives (ed. by Robert Jarrow), Risk Publications 1998

Review of Financial Studies, 1998
Papers and Proceedings of the American Statistical Association, 1995

I wrote several papers that were all kind of the same. They all answered questions like, "If I own a particular asset (say, the dollar), how much of another asset (say, dollar futures) should I own in order to minimize the riskiness of my portfolio?" In geek-speak, these papers all used multivariate volatility models to compute optimal financial hedge ratios. Here are some of those papers. For the most part, they differ in that they are each applied to different markets. But the questions addressed and the tools used are pretty similar.

Interesting anecdote: The fixed income paper...I didn't write a word of it. I didn't perform a single piece of empirical analysis. I never even read the paper. And I don't think I ever met my coauthors. I hope it's a good paper.

Journal of Financial and Quantitative Analysis, 1993
CFA's summary of 1998 Journal of Fixed Income article
Pacific Basin Capital Markets Research Volume II, North Holland Press 1991

The euro was introduced in 1999. In this 1998 paper, BGI colleague Kevin Coldiron and I analyzed how the euro's introduction should impact the way that investors decide which countries and asset classes they invest in.

Interesting anecdote: This paper won the Institutional Investor Award for best international paper in any Institutional Investor journal in 1999.

Journal of Investing, 1999

The options markets give you one forecast of volatility, and time series models (like GARCH) give you another. My World Bank coauthor (Stijn), one of my Ph.D. students (Kevin) and I showed that you get better forecasts by blending the two techniques than by using either of them stand-alone.

Interesting anecdote: This paper was reprinted in Economic Forecasting, edited by Terence C. Mills, Edward Elgar Publishing, 1999

Journal of Forecasting, 1995

In the 1990s, research on interest rate movements assumed that risk (or volatility) was a function of only the level of the interest rate. High interest rates meant high risk. By allowing for richer volatility dynamics, University of Arizona colleagues Robin Brenner, Rich Harjes and I were able to model interest rate movements suprisingly more effectively than the existing literature. We were also able to show that the level of the interest rate didn't have as big an impact on risk as the existing literature assumed.

Journal of Financial and Quantitative Analysis, 1996

Big insurance companies should be better than small ones at screening out bad drivers, and therefore should insure better risks and have fewer claims as a result. My undergrad professor, Doug West, and I (more him than me) developed a theoretical model for this observation, and confirmed it empirically.

Interesting anecdote: This is one of two papers I wrote with my undergraduate professor, Doug West. Truth is that for this paper, I was just his research assistant while I was home for summers from grad school. He felt so guilty about how hard I worked on the paper that he rewarded me by naming me a coauthor.

Journal of Risk and Insurance, 1995

You ever notice that auto dealers choose to locate next to other auto dealers? Ditto for furniture stores, etc. Why would they voluntarily choose to park right beside a competitor? In the 1930s an economist presented a theory for why this happens, which came to be known as the "Christaller theory of central places." This paper, coauthored with two of my undergrad professors, was the first to evaluate his hypothesis empirically.

Interesting anecdote: This paper was published while I was an undergraduate, in one of the top journals in economics. It probably helped me get into grad school at UC San Diego. (I could never get in today.)

Economics Journal, 1985

If a country needs to go into debt, which country should it borrow from? World Bank economist Stijn Claessens and I demonstrate an innovative way to make that decision, under the (admittedly unrealistic) assumption that a country cares deeply about the riskiness of that debt portfolio.

Interesting anecdote: This was chapter three of my Ph.D. dissertation.

Interesting anecdote: This paper was written over the summer between finishing grad school and starting at Univ of Arizona, while I was consulting for the World Bank.

Journal of International Money and Finance, 1991

A simple paper in a trade journal that summarizes different ways to forecast risk, and highlights how each of them are the same and how they differ. It was relatively insightful, given its simplicity.

Interesting anecdote: The editor asked me to write this paper after he saw me give a presentation on this topic at practitioner conference.

Derivatives Quarterly, 1995

Most economists argue that flexible exchange rates are good, in that they give a nation more control over its own economic policy. But exchange rate risk could partially offset those benefits by adversely impacting foreign trade. In this paper, Bill Lastrapes and I showed that trade was indeed impacted by currency risk.

Journal of International Money and Finance, 1993

Link to presentations and speeches