Standard tests of portfolio efficiency neglect the existence of illiquid wealth. The most important illiquid asset in household portfolios is housing: if housing stock adjustments are infrequent, optimal portfolios in periods of no adjustment are affected by housing price risk through a hedge...

We address the issue of the efficiency of household portfolios in the presence of housing risk. We treat housing stock as an asset and rents as a stochastic liability stream: over the life-cycle, households can be short or long in their net housing position. Efficient financial portfolios are...

We study the effect of financial crises on hedge fund risk. Using a regime-switching beta model, we separate systematic and idiosyncratic components of hedge fund exposure. The systematic exposure to various risk factors is conditional on market volatility conditions. We find that in the...

Under the New Basel Accord bank capital adequacy rules (Pillar 1) are substantially revised but the introduction of two new Pillars is, perhaps, of even greater significance. This paper focuses on Pillar 2 which expands the range of instruments available to the regulator when intervening with...

We consider a mean-variance general equilibrium economy where the expected returns for controlling and non-controlling shareholders are different because the former are able to divert a fraction of the profits. We find that when investor protection is poor, asset return correlation affects...

This paper examines four daily hedge fund return indices: MSCI, FTSE, Dow Jones, and HFRX, all based on investable hedge funds, and three monthly hedge fund return indices: CSFB Tremont, CISDM, and HFR, which comprise both investable and non-investable hedge funds. Our study, based on standard...

The recent introduction into the Italian mutual fund market of Morningstar performance rating of private institutions gives rise to the question of what is the relation between this relative benchmark measure and the other traditional performance measures. This paper provides a comprehensive...

Standard tests of portfolio efficiency neglect the existence of illiquid wealth. The most important illiquid asset in household portfolios is housing: if housing stock adjustments are infrequent, optimal portfolios in periods of no adjustment are affected by housing price risk through a hedge...

We address the issue of the efficiency of household portfolios in the presence of housing risk. We treat housing stock as an asset and rents as a stochastic liability stream: over the life-cycle, households can be short or long in their net housing position. Efficient financial portfolios are...

In this paper we argue that standard tests of portfolio efficiency are biased because they neglect the existence of illiquid wealth. In the case of household portfolios, the most important illiquid asset is housing: if housing stock adjustments are costly and therefore infrequent, we show how...