Mark B. Wise, Yonathan Schwarzkopf and Vineer Bhansali Volume 9, Number 3, Third Quarter 2011 We investigate the optimal stop-loss on the alpha investment for a portable alpha vehicle. The optimal stop-loss maximizes investors utility of wealth for a portfolio consisting of a portable alpha fund and risk free assets. We model the dynamics of… Read more
Articles
Hedge Funds: A Sensible Approach to Oversight
Antony E. Ghee Volume 9, Number 3, Third Quarter 2011 After years of debating whether additional regulation should be imposed on hedge funds, legislative initiatives, such as the Dodd-Frank Act, have recently been enacted and could significantly alter the scope of government oversight in an industry that has, until recently, been subject to little regulatory… Read more
Portfolio Diversification
James A. Bennett and Richard W. Sias Volume 9, Number 3, Third Quarter 2011 Contrary to conventional wisdom, there is no evidence investors can, or have ever been able to, easily form portfolios containing negligible exposure to unsystematic returns. Because well-diversified portfolios are the bedrock upon which so much financial theory is built, investors’ inability… Read more
The Performance, Pervasiveness, and Determinants of Value Premium in Different US Exchanges: 1985-2006
George Athanassakos Volume 9, Number 3, Third Quarter 2011 Using AMEX, NASDAQ and NYSE stock market data for the period 1985-2006, this paper sheds further light into the value premium and the discussion of whether the value premium is driven by risk or behavioral factors. The paper utilizes a more comprehensive set of data and… Read more
Robust Portfolio Rebalancing with Transaction Cost Penalty An Empirical Analysis
Vitaly Serbin, Milan Borkovec and Michael Chigirinskiy Volume 9, Number 2, Second Quarter 2011 The goal of this paper is to study and compare two popular techniques used by practitioners to reduce the sensitivity of optimal portfolios to uncertainty in expected return for a typical portfolio optimization problem. Specifically, we investigate whether including transaction costs… Read more
Multiple Time Scale Attribution for Commodity Trading Advisor (CTA) Funds
Brian T. Hayes Volume 9, Number 2, Second Quarter 2011 Commodity trading advisors (CTAs) make directional investments in liquid futures and forward markets. Since CTAs generally do not engage in security selection or relative value trades, their performance depends to a large extent on funds ability to time market exposures. We analyze CTA return attribution… Read more
Predicting Financial Distress and the Performance of Distressed Stocks
John Y. Campbell, Jens Hilscher and Jan Szilagyi Volume 9, Number 2, Second Quarter 2011 In this paper, we consider the measurement and pricing of distress risk. We present a model of corporate failure in which accounting and market-based measures forecast the likelihood of future financial distress. Our best model is more accurate than leading… Read more
Efficient Markets in Crisis
Meir Statman Volume 9, Number 2, Second Quarter 2011 A belief that markets are efficient is blamed for instigating the crisis we are in and lulling us into complacency as the crisis was approaching. But the debate about the role of such belief in the crisis is unfocused for two reasons. First, a lack of… Read more
Has Hedge Fund Alpha Disappeared?
Manuel Ammann, Otto Huber and Markus Schmid Volume 9, Number 1, First Quarter 2011 This paper investigates the alpha generation of the hedge fund industry based on a recent sample compiled from the Lipper/TASS database covering the time period from January 1994 to September 2008. We find a positive average hedge fund alpha in the… Read more
The National Transportation Safety Board: A Model for Systemic Risk Management
Eric Fielding, Andrew W. Lo and Jian Helen Yang Volume 9, Number 1, First Quarter 2011 We propose the National Transportation Safety Board (NTSB) as a model organization for addressing systemic risk in industries and contexts other than transportation. When adopted by regulatory agencies and the transportation industry, the safety recommendations of the NTSB have… Read more