Proponents of the existence of an optimum capital structure suggest that companies continue to employ debt until the marginal benefit of leverage equals its marginal cost. In contrast, advocates of the pecking order theory contend that observed capital structures reflect the relationship between...

This paper will examine some commonly adopted approaches to the measurement of risk in finance and the various shortcomings implicit in the underpinnings of these approaches: early views on the nature of risk and uncertainty (Hume, Bernoulli, Knight, Keynes and Ramsey); the adoption of a mean...

The phenomenon of the occurrence of rare yet extreme events, “Black Swans” in Taleb's terminology, seems to be more apparent in financial markets around the globe. This means there is not only a need to design proper risk modelling techniques which can predict the probability of risky events...

This paper features an analysis of the effectiveness of a range of portfolio diversification strategies, with a focus on down-side risk metrics, as a portfolio diversification strategy in a European market context. We apply these measures to a set of daily arithmetically-compounded returns, in...

This paper features an analysis of the effectiveness of a range of portfolio diversi cation strategies, with a focus on down-side risk metrics, as a portfolio diversification strategy in a European market context. We apply these measures to a set of daily arithmetically compounded returns on a...

In this paper, we document that realized variation measures constructed from high-frequency returns reveal a large degree of volatility risk in stock and index returns, where we characterize volatility risk by the extent to which forecasting errors in realized volatility are substantive. Even...