Perold (2007) shows that, given a diffuse prior that is being updated in light of a noisy market price, the posterior distribution says that value-weighting and equal-weighting one's portfolio makes no difference. We argue that the diffuse prior is hard to reconcile with reality and that a...

In this article, the authors find that a typical application of volatility-timing strategies to the stock market suffers from a look-ahead bias, despite existing evidence on successes of the strategies at the stock level. After correcting the bias, the strategy becomes very difficult to...

Traditional performance evaluation measures do not account for tail events and rare disasters. To address this issue, we reinterpret the riskiness measures of Aumann and Serrano (Journal of Political Economy, 2008) and Foster and Hart (Journal of Political Economy, 2009) as performance indices....

We extend Cass and Stiglitz's analysis of preference-based mutual fund separation. We provide a complete characterization of the general K-fund separation. We show that some instances of separation with many funds can be constructed by adding inverse marginal utility functions having separation...