The purpose of this paper is to understand how the current financial landscape shaped by the crises and new regulations impacts Investment Banking's business model. We will focus on quantitative implications, i.e. valuation, modeling and pricing issues, as well as qualitative implications, i.e....

In previous studies, high-frequency data has been used to improve portfolio allocation by estimating the full realized covariance matrix. In this paper, we show that strategies using high-frequency data for measuring and forecasting univariate realized volatility alone can already generate...

We propose a new class of performance measures for Hedge Fund (HF) returns based on a family of empirically identifiable stochastic discount factors (SDFs). The SDF-based measures incorporate no-arbitrage pricing restrictions and naturally embed information about higher-order mixed moments...

We examine machine learning and factor-based portfolio optimization. We find that factors based on autoencoder neural networks exhibit a weaker relationship with commonly used characteristic-sorted portfolios than popular dimensionality reduction techniques. Machine learning methods also lead to...

I derive a generalized version of the fundamental law of active management under some weak conditions. I show that the original fundamental law of Grinold and various extensions are special cases of the result presented in this paper. I also show that cross-sectional ICs are usually different...

It is difficult to predict stock market returns but relatively easy to predict market volatility. But volatility predictions don't easily translate into return predictions since the two are largely uncorrelated. We put forward a framework that produces a formula in which returns become a...

This study investigates long run metals properties using the extended version of Mccown and Zimmerman (2006) multifactor CAPM-model. By adding extra explanatory variables we improve the explanation power of the existing model in terms of R-squared. Taking German invertors' perspective and using...

In the paper we introduce an empirical approximation of the log-optimal investment strategy that guarantees an almost optimal growth rate of investments. The proposed strategy also considers the effects of portfolio rearrangement costs on growth optimality and advises a suboptimal portfolio for...

Retirees face longevity risk, or the risk of living longer (or less long) than expected; market risk, or the risk of poor investment returns over the retirement horizon, and finally; failure risk, or the risk of running out of money before death. The authors examine the sensitivity of these three...

We propose a new methodology for abnormal return detection and correction, and evaluate the economic impacts of outliers on asset allocations with higher-order moments (Cf. Jurczenko et al., 2008). Indeed, extreme returns and outliers greatly affect empirical higher-order moment estimations (Cf....