Volume 10, Number 1, First Quarter 2012 View PDF… Read more
2012
When Sell-Side Analysts Meet High-Volatility Stocks: An Alternative Explanation for the Low-Volatility Puzzle
Jason C. Hsu, Hideaki Kudoh and Toru Yamada Volume 11, Number 2, Second Quarter 2013 Using a global equity dataset that includes emerging markets, we confirm that high-volatility stocks tend to deliver low average returns; this effect is robust to adjustments for country and style factors. We also show that sell-side analysts earnings growth forecasts… Read more
Price Inflation and Wealth Transfer During the 2008 SEC Short-Sale Ban
Lawrence E. Harris, Ethan Namvar and Blake Phillips We estimate that the ban on short-selling financial stocks imposed by the SEC in September 2008 led to price inflation of 10-12% in the banned stocks based on a factor-analytic model that extracts common valuation information from the prices of stocks that were not banned. This inflation… Read more
SURVEYS AND CROSSOVERS: Structured Finance Deals: A Review of the Rating Process and Recent Evidence Thereof
Seoyoung Kim Volume 10, Number 4, Fourth Quarter 2012 View PDF… Read more
BOOK REVIEWS: On the Brink – Inside the Race to Stop the Collapse of the Global Financial System
Volume 10, Number 4, Fourth Quarter 2012 On the Brink – Inside the Race to Stop the Collapse of the Global Financial System Henry Paulson Reviewed by Javier Estrada View PDF… Read more
CASE STUDIES: Providing for Retirement
Jack L. Treynor Volume 10, Number 4, Fourth Quarter 2012 View PDF… Read more
Was the Writing on the Wall? An Options Analysis of the 2008 Lehman Brothers Crisis
Zhirong Chen and Wai Mun Fong Volume 10, Number 4, Fourth Quarter 2012 This paper uses risk neutral densities (RNDs) of stock options to investigate the markets perceptions of crash risk in the recent U.S. subprime crisis. RNDs were estimated using the double lognormal method for the S&P 500 market index, Lehman Brothers, Merrill Lynch… Read more
The Role of Stress Testing in Credit Risk Management
Roger M. Stein Volume 10, Number 4, Fourth Quarter 2012 In this article, we outline some concepts relating to the use of stress testing in credit risk management. We begin by providing a simple taxonomy of stress scenarios and discussing the trade-offs that different approaches require for implementation. Our taxonomy is modeled after one that… Read more
The Controversy in Fundamental Indexation: Why Both Sides of the Argument are (Mostly) Correct
Michael Dempsey Volume 10, Number 4, Fourth Quarter 2012 We examine the contribution of noise to the theoretical underpinnings of Fundamental Indexation (FI). Although we argue that market capital-weighted indexes do not incur a structural drag due to noise as claimed by the proponents of FI, we conclude, nevertheless, that noise as advanced by FI… Read more
Coherent Asset Allocation and Diversification in the Presence of Stress Events
Riccardo Rebonato and Alexander Denev Volume 10, Number 4, Fourth Quarter 2012 We propose a method to integrate frequentist and subjective probabilities in order to obtain a coherent asset allocation in the presence of stress events. Our working assumption is that in normal market asset returns are sufficiently regular for frequentist statistical techniques to identify… Read more