Second Quarter (2003)

Craig W. FrenchWe explore unpublished early work of Jack Treynor, who deserves credit for the original Capital Asset Pricing Model because of his revolutionary manuscripts, “Market Value, Time, and Risk” and “Toward a Theory of Market Value of Risky Assets”, which were circulated during the 1960s but have never been published in a journal. Mr… Read more

Eric M. LeeperAn asset-pricing perspective on inflation reveals that it depends on current and expected monetary and fiscal policies. There are three ways to carry $1 today into the future: money, bonds, and real assets. That dollar’s purchasing power varies inversely with the price level. Expected money growth, tax rates, and government spending directly impinge… Read more

Mark Anson and Ho HoMany investors demand position transparency from hedge fund managers in the belief that more information is better than less. However, certain hedge fund strategies create synthetic investment positions that resemble a short put option, and these positions are not revealed by position transparency. Specifically, event-driven hedge funds and merger arbitrage hedge… Read more

Ricahrd O. MichaudTraditional portfolio optimality criteria often have serious theoretical or practical limitations. A financial planning portfolio choice framework consisting of a resampled efficient portfolio set and geometric mean analysis is a practical alternative for many situations of investment interest. While Monte Carlo financial planning is a more flexible framework, geometric mean analysis may be… Read more

Mark Rubinstein Franco Modigliani and Merton Miller are almost universally credited with the theorem that bears their name. In fact, the theorem was stated and proven 20 years earlier by John Burr Williams, to which he gave the name: “the Law of the Conservation of Investment Value.” However, Modigliani-Miller deserve credit for clearly laying out… Read more