The concept of rational performance-chasing equilibrium in recent literature is supported neither by theory nor by empirical evidence. A more accurate model of such market dynamics is based on investor confusion, which is partly driven by some active managers' performance manipulation. Unlike...

The “less-developed” interior of early modern Europe, especially the rural economy, is often regarded as financially comatose. This paper investigates this view using a rich dataset of marriage and death inventories for seventeenth-century Germany. It first analyzes how borrowing varied with...

Experimental analyses have identified significant tendencies for individuals to follow herd decisions, a finding which has been explained using Bayesian principles. This paper outlines the results from a herding task designed to extend these analyses using evidence from a functional magnetic...

A detailed Net Present Value (NPV) model has been developed to evaluate the economic viability of an Integrated Gasification Combined Cycle – Membrane Reactor (IGCC-MR) power plant intended to provide an electricity generating and pure H2 (hydrogen) producing technology option with...

Mean-variance optimisation has been roundly criticised by financial economists and practitioners alike, leading many to advocate a simple 1/N weighting heuristic. We investigate the performance of the Markowitz technique conditional on investor forecasting ability. Using a novel analytical...

This paper is concerned with testing the time series implications of the capital asset pricing model (CAPM) due to Sharpe (1964) and Lintner (1965), when the number of securities, <em>N</em>, is large relative to the time dimension, <em>T</em>, of the return series. Two new tests of CAPM are proposed that exploit...

The use of correlation between forecasts and actual returns is commonplace in the literature, often used as a measurement of investors’ skill. A prominent application of this is the concept of the Information Coefficient (IC). Not only can IC be used as a tool to rate analysts and fund...

The purpose of this paper is to propose an innovative method of evaluating the performance of active fund managers, by introducing to the field of performance measurement the more appealing loss aversion utility theory. We combine the latter to an already established performance measure...

Modelling of conditional volatilities and correlations across asset returns is an integral part of portfolio decision making and risk management. Over the past three decades there has been a trend towards increased asset return correlations across markets, a trend which has been accentuated...

In light of recent regulatory initiatives focusing on fair treatment of customers in financial markets, this paper examines the agency problem created by an asset manager with market impact, segregated accounts and preference-based contracts. It illustrates how aggregate client welfare and...