A definition for a common factor for bivariate time series is suggested by considering the decomposition of the conditional density into the product of the marginals and the copula, with the conditioning variable being a common factor if it does not directly enter the copula.  The links of...

Recent studies in the empirical finance literature have reported evidence of two types of asymmetries in the joint distribution of stock returns. The first is skewness in the distribution of individual stock returns, while the second is an asymmetry in the dependence between stocks: stock...

Evidence that asset returns are more highly correlated during volatile markets and during market downturns (see Longin and Solnik, 2001, and Ang and Chen, 2002) has lead some researchers to propose alternative models of dependence. In this paper we develop two simple goodness-of-fit tests for...

One can consider the concept of market neutrality for hedge funds as having breadth and depth: breadth reflects the number of market risks to which a fund is neutral, while depth reflects the completeness of the neutrality of the fund to market risks. We focus on market neutrality depth, and...

In this paper we develop a simple theoretical model to analyze the impact of institu- tional herding on asset prices. A growing empirical literature has come to the intriguing conclusion that institutional herding positively predicts short-term returns but nega- tively predicts long-term...

Recent studies show that single-quarter institutional herding positively predicts short-term returns. Motivated by the theoretical herding literature, which emphasizes endogenous persistence in decisions over time, we estimate the effect of multi-quarter institutional buying and selling on stock...

This paper ?nds that fund herding, de?ned as the tendency of a mutual fund to follow past aggregate institutional trades, is an important predictor of mutual fund performance. Examining actively managed U.S. equity mutual funds over the period 1990-2009, we ?nd that funds with a higher herding...

This paper presented a new technique for the simulation of the Greeks (i.e. price sensitivities to parameters), efficient for strongly discontinuous payoff options. The use of Malliavin calculus, by means of an integration by parts, enables to shift the differentiation operator from the payoff...

In this paper we compare overall as well as downside risk measures with respect to the criteria of first and second order stochastic dominance. While the downside risk measures, with the exception of tail conditional expectation, are consistent with first order stochastic dominance, overall risk...

We propose a rational theory of momentum and reversal based on delegated portfolio management. A competitive investor can invest through an index fund or an active fund run by a manager with unknown ability. Following a negative cashflow shock to assets held by the active fund, the investor...