This paper calculates carry costs directly and focuses on the effect that carry cost lumpiness has on hedge variables. It shows that carry cost adjusted price changes should be used to reduce errors in the calculated hedge: ratio, profit, and effectiveness. Results demonstrate that the errors...

Ferguson and Leistikow [(1997). Journal of Financial Engineering 6, 1–30] (FLa) was the first long-run risk-neutral analysis of the performance volatility incentives created by investment management fee structures. This paper extends FLa in six ways. It allows the portfolio's value to change,...

The insurance business is fraught with problems for which, in many insurance lines, a solution that is acceptable to consumers and leaves the insurance business viable is not likely. We analyze the factors that create this situation. Consumers often view economically viable premiums as too high....

Legislators, regulators, and academics are insisting that the brokerage industry unbundle by separating investment research fees from trading. They also want to foster market efficiency. These two positions are at odds unless investment research is subsidized

Many studies have found that portfolios of low beta stocks have higher growth rates than portfolios of high beta stocks and have concluded that low beta stocks have higher growth rates than high beta stocks. Since rational investor behavior is thought to imply that additional risk is rewarded...

The stock market is not likely to be efficient. This paper provides examples of why. Specifically, it shows how lack of understanding by investors and financial analysts can distort prices in relation to fair value

High expected returns are attractive but are associated with high risk. Ultimately, risk shows up as volatility. Volatility is a fundamental feature of a business but can be increased through firm or investor leverage. Volatility without leverage significantly reduces long term return. Leverage...

This paper contrasts the perspectives provided by the traditional Modern Portfolio Theory (MPT) analysis, which uses arithmetic returns, and the Stochastic Portfolio Theory (SPT) analysis, which uses continuous returns. The MPT analysis implies that an efficient portfolio's reward is...