This paper demonstrates that the use of GARCH-type models for the calculation of minimum capital risk requirements (MCRRs) may lead to the production of inaccurate and therefore inefficient capital requirements. We show that this inaccuracy stems from the fact that GARCH models typically...

Factor models are frequently applied to hedge fund returns in an attempt to separate the return from identified risk factors (beta) and from manager skill (alpha). More recently, these same techniques have been used to replicate the returns from hedge fund strategies with varying degrees of...

Research has highlighted the usefulness of the Gilt-Equity Yield Ratio (GEYR) as a predictor of UK stock returns. This paper extends recent studies by endogenising the threshold at which GEYR switches from being low to being high or vice versa, thus improving the arbitrary nature of the...

There is widespread evidence that the volatility of stock returns displays an asymmetric response to good and bad news. This article considers the impact of asymmetry on time-varying hedges for financial futures. An asymmetric model that allows forecasts of cash and futures return volatility to...

This article proposes a new model for autoregressive conditional heteroscedasticity and kurtosis. Via a time-varying degrees of freedom parameter, the conditional variance and conditional kurtosis are permitted to evolve separately. The model uses only the standard Student`s t-density and...

It is frequently suggested that the globalisation of financial markets has been responsible for reducing the scope for independent monetary policy action by strengthening the relationship between national fixed income markets. An associated concern is that the linkages between these markets...

Long-dated gilt yields are currently well below the comparable German and US government bond yields for the first time in many years. This article considers what factors are likely to have contributed to these changes in nominal rates of return. We conclude that much of the decline in long gilt...

The UK's defined benefit pensions industry makes widespread use of pooled investment vehicles which are provided by a large number of fund management groups. In this paper we provide the first comprehensive performance analysis of these funds. Using data on 734 pooled funds, that had a combined...

Following the decline in global equity markets, the rise in bond prices and the downward revisions to assumed mortality rates between 2001 and 2003, the UK's defined benefit (DB)pensions industry went from a situation where surpluses and scheme sponsor contribution holidays were commonplace, to...