The complex dynamics of world financial markets yield inherent uncertainty and the prospect of periods of enhanced volatility. The turbulent global economic and regulatory environment of the past few years has certainly illustrated this reality. As investment managers interpret clients’...

This paper provides an appraisal of how London has become the world ís largest market for asset management and evaluates whether it possesses the attributes necessary to sustain success in the future. We find that most of the growth in the London market has come from the institutional asset...

In this, the fourth article in the economists’ hubris paper series, we look at the contributions of academic thought to the field of asset management. We find that while the theoretical aspects of the modern portfolio theory are valuable, they offer little insight into how the asset management...

The two classic objectives of investment are to reduce variability, and to protect the portfolio from shortfalls. There is a profound contradiction between these two objectives. We have shown that the dynamic efficient frontier (DEF) with minimal standard deviation for a given expected profit...

Historically, the practice of trustees of defined benefit programs has been to make the asset allocation decision based on prevailing risk-return relationship for asset classes without regard to the plan’s economic funded ratio, liability structure, and liability economic growth rate. Once the...

The recent financial crisis highlighted the dangers of systemic risk. In this regard no common view appears to exist on the definition, measurement, and real impact of systemic risk on the financial system. This paper aims to analyze the relationship between systemic risk and portfolio...

The new Basel III rules for liquidity and funding will have an impact on several areas of the banking business. As a consequence, it is useful to identify the key areas within a bank where Basel III has the biggest impact and to define the necessary strategies, processes, and new products to...

Traditional risk management of hedge funds is often complicated by their lack of transparency. Consequently, plan sponsors traditionally rely on returns analysis to manage the risk of a portfolio of hedge funds. Such an approach involves some obvious difficulties, for example, returns data is...

Starting in September 2008 stock market regulators across the world introduced, at different times and for different durations, bans on short-selling financial institution’s shares. The argument for the bans is that short selling increases the volatility and contagion risk of financial...

The link between investor sentiment and asset valuation is at the center of a long-running debate in behavioral finance. Using a new composite sentiment indicator, we show that the conventional risk does not explain the abnormal returns of portfolios most sensitive to the sentiment factor. Our...