Despite ever more sophisticated risk management and measurement, investment professionals have generally overlooked a simple but powerful metric of relative risk and portfolio diversification -- the normal return gap. We develop a generalized specification of the expected difference in returns...

Whether institutional investors monitor corporations and improve firm value is a key question for corporate governance and investment management. I find little empirical support for the hypothesis that institutions undertake monitoring that increases firm quality and valuation. Granger causation...

Millions of defined benefit pensioners must select a pension insurance method. We present a framework for making this decision within the context of US military veterans' Survivor Benefit Plan (SBP). Federal government subsidies generate a positive expected net payout for SBP. While insurance...

I examine energy stocks in the context of a diversified investment portfolio. Several factors – the importance of the energy sector, their potential to hedge energy risks, growing interest in real assets, as well as anecdotes of sophisticated investors focusing on energy investments –...

Using a sample of Investment Policy Statements [IPSs] from college and university endowments, we examine the form and use of these important documents. Direct examination of the IPS reveals subtleties that surveys may obscure. In addition to providing statistical insights into endowment...

Diversification is often spoken of as the only free lunch in investing, yet we show that it is not free and is properly considered only in light of its costs. More-exotic asset classes typically come with a higher price tag. We show that fees on diversifying asset classes are high relative to...

Investors generally face inflation-linked obligations - a fact contributing to the popularity of TIPS and other inflation-linked bonds. With TIPS, one characterization of inflation, the Consumer Price Index, applies to all investors. Investors, however, face different flavors of inflation. To...

We study the relation between the percentage of outstanding shares held by a firm's largest institutional owner and the bid-ask spread on that firm's shares, a measure of information risk. We find that the greater the percentage of shares held by the largest institutional investor, the greater...