This paper analyzes the single period portfolio selection problem on the location-scale return family. The skew normal distribution, after recentering and reparameterization, is shown to be in this family. The recentered and reparameterized distribution, called factor-recentered skew normal, can...

This paper explores the profitability of portfolio-based momentum strategies. The data consists of all NYSE, AMEX, and NASDAQ stocks on the CRSP database. The analysis considers the period July 1963 to December 2002 and the tests are performed on portfolios formed on industry, size and...

In this paper, I obtain new measures of the value of active portfolio management by forming replicating portfolios. These measures allow for a separate evaluation of fund managers' strategic and tactical decisions. I also obtain new evidence on the value of trading by decomposing it into...

This paper studies the relation between fund performance and the fund manager's investment strategy, which is based on the characteristics of the portfolio. The results show that neither momentum characteristics nor the valuation of stocks can explain differences in fund performance. However,...

We analyze bubbles and crashes in a model in which some investors are partially sophisticated. While the expectations of such investors are endogenously determined in equilibrium, these are based on a coarse understanding of the market dynamics. We highlight how such investors may endogenously...

The inefficiency of the stock markets is often bound to the stake in evidence of anomalies noticed in the behavior of returns by several authors. These anomalies are revealing of inefficiency if their knowledge permits to make a profit ex-ante of strategies based on them. De Bondt and Thaler...

Optimal portfolios of variance swaps are constructed taking account of both autocorrelation and cross asset dependencies. Market prices of variance swaps are extracted from option surface calibrations. The methods developed permit simulation of cash flows to arbitrary portfolios of variance...

The benchmark CAPM linearly relates the expected returns on an arbitrary asset, an arbitrary benchmark portfolio, and an arbitrary MV frontier portfolio. The benchmark is not required to be on the frontier and may be non-perfectly correlated with the frontier portfolio. The benchmark CAPM...