Our methodology of 'complete identification,' using simple algebraic geometry, throws new light on the continued commitment of Galton's Error in finance and the resulting misinformation of investors. Mutual funds conventionally advertise their relative systematic market risk, or 'betas,' to...

We examine differences in the performance flow relationship (PFR) between different segments of the fund industry. Such differences can be caused by distinct mutual fund investors’ characteristics in different segments. In our empirical study of the US equity mutual fund industry in 1993-2001,...

Markowitz’s (1952) portfolio theory has permeated financial institutions over the past 50 years. Assuming that returns are normally distributed, Markowitz suggests that portfolio optimization should be performed in a mean-variance framework. With the emergence of hedge funds and their...

Using one of the greatest hedge fund database ever used (2796 hedge funds including 801 dissolved), we investigate hedge funds performance using various asset-pricing models, including an extension form of Carhart's (1997) model combined with Fama & French (1998) Agarwal & Naik (2000) models and...

In the context of futures markets, we study whether brokers allocate more favorable trades to their own accounts, and less favorable trades to their customers. We find that, within a thirty minute trading bracket, brokers on average buy at a lower price and sell at a higher price for their own...

A hotly debated issue in the market microstructure literature is the effectiveness of call auctions as against continuous trading systems. In this paper we investigate this issue by studying the impact of the suspension of opening and closing call auctions by the National Stock Exchange of India...

A number of empirical studies have reached the conclusion that stock price volatility cannot be fully explained within the standard dividend discount model. This paper proposes a resolution based upon a model that contains both a random supply of risky assets and finitely lived agents who trade...

As a reaction to the general suspicion that margin loans had been a key element of the stock market boom and crash of the late 1920s, the Federal Reserve Bank was empowered to regulate margin lending with the Securities and Exchange Act. The efficacy of the Federal Reserve's margin policy has...

The paper analyses the impact of the suspension of opening and closing call auctions by the National Stock Exchange of India in 1999. We compare volatility, efficiency and liquidity (VEL) of securities before and after suspension, and estimate the value of the auctions using an event study....

We analyse the equilibrium consequences of performance-based contracts for fund managers. Managerial remuneration is tied to a fund's absolute performance and its performance relative to rival funds. Investors choose whether or not to delegate their investment to better-informed fund managers;...