Standard factor models imply a linear relationship between expected returns on assets and their factor exposures. We provide the asymptotic properties of factor-model-based expected return estimators for individual assets and show that exploiting this linear relationship leads to precision gains...

Regulators often set value-at-risk (VaR) constraints to limit the portfolio risk of institutional investors. For some investors, notably pension funds, the VaR constraint is enforced over a horizon which is significantly shorter than the investment horizon of the investor. Our paper aims to...

Groups of agents, such as participants in a collective pension fund, can decide to undertake a joint investment and to define, ex ante, a rule for the division of proceeds. The collective investment decision and the allocation rule together form a risk sharing scheme. Such a scheme defines a...

We investigate the relationship between rule-based versus risk-based regulatory choices in different countries and the real investment performance of their pension funds. Pension systems in countries with more mature risk-based regulatory regimes tend to demonstrate superior investment...

In this paper, we propose a new risk model to better address events like the recent credit crisis. First, the possible start of a crisis is modeled by including a low-probability jump process. Second, the risk characteristics of the crisis are captured by allowing for time-varying volatilities...