In this paper, we deal with the possibility of using econophysics concepts in dynamic portfolio optimization. The main idea of the research is that combining different methodological aspects in portfolio selection can enhance portfolio performance over time. Using data on CESEE stock market...

The efficient-market hypothesis (EMH) is one of the most important economic and financial hypotheses that have been tested over the past century. Due to many abnormal phenomena and conflicting evidence, otherwise known as anomalies against EMH, some academics have questioned whether EMH is...

Purpose - It is crucial to find a better portfolio optimization strategy, considering the cryptocurrencies' asymmetric volatilities. Hence, this research aimed to present dynamic optimization on minimum variance (MVP), equal risk contribution (ERC) and most diversified portfolio (MDP)....

Stock markets around the world experienced a massive collapse during the first wave of COVID-19. Roughly in the month of January 2021, the second wave of COVID-19 struck in India, reaching its peak in May, and by the end of May, the active cases started to decline. A third wave is again...

This study investigates the performance of Bitcoin as a diversifier under different constraining portfolio optimization frameworks. The study employs different constraining optimization frameworks that seek to maximize risk-adjusted returns (Sharpe ratio) of the portfolio by optimizing...

Smart beta exchange-traded funds (SB ETFs) have caught the attention of investors due to their supposed ability to offer a better risk-return trade-off than traditionally structured passive indices. Yet, research covering the performance of SB ETFs benchmarked to traditional cap-weighted market...

This paper investigates the extent of volatility or risk spillovers between the currency carry trade and asset markets, namely the equity and bond markets, in South Africa to infer the extent of the connectivity between the two markets. The carry trade operation examined in this paper involves...

We exploit individual security holdings data for global mutual funds to distinguish between two reasons why a fund's holdings of emerging market economy (EME) bonds might change: (i) the amount invested in the fund changes and (ii) the fund manager changes portfolio allocations. We find that...

There is a large and growing literature on spillovers but no study that systematically evaluates the importance of spillovers for portfolio management. This paper provides such an analysis and demonstrates that spillovers are fully embedded in estimates of expected returns, variances, and...

In the U.S., the geometric return on stocks has been higher than the geometric return on bonds over long periods. We study whether balanced portfolios have a larger geometric return (and expected log return) than stock portfolios when the risk premium is low. We use a theoretical model and...

We consider a sovereign wealth fund that invests broadly in the international financial markets. The influx to the fund has stopped. We adopt the life cycle model and demonstrate that the optimal spending rate from the fund is significantly less than the fund's expected real rate of return. The...

This paper studies the historical time-varying dynamics of risk for individual stocks in the U.S. market. Total risk of an individual stock is decomposed into two components, systematic risk and idiosyncratic risk, and both components are studied separately. We start from the historical trend in...

The purpose of this study is to address the critical issue of optimal credit allocation. Predicting a borrower's probability of default is a key requirement of any credit allocation system but turning it into labeled classes leads to problems in performance measurement. In this paper the...

Cryptocurrency literature is increasing rapidly nowadays. Particularly, the role of the cryptocurrency market as a risk management avenue has got the attention of researchers. However, it is an immature asset class and requires gaps in current literature for future research directions. This...

This study attempts to investigate the nexus between investor sentiment and cryptocurrencies prices. Our empirical investigation merges bivariate and multivariate wavelet tools to examine the investor sentiment nexus to inter-cryptocurrencies prices. The study outcomes show that the Sentix...

In the present paper, we investigate the Merton portfolio management problem in the context of non-exponential discounting, a context that gives rise to time-inconsistency of the decision-maker. We consider equilibrium policies within the class of open-loop controls that are characterized, in...

WThis doctoral thesis focuses on the effects of investor sentiment on asset pricing and the challenges of portfolio optimization under parameter uncertainty. The first essay "Sentiment risk premia in the cross-section of global equity" applies a recently developed sentiment proxy to the...

Mutual fund risk-taking via active portfolio rebalancing varies both in the crosssection and over time. In this paper, I show that the same is true for funds' off- balance sheet risk-taking, even after controlling for on-balance sheet activities. For this purpose, I propose a novel measure of...

We theoretically show that there is a fundamental disconnect be- tween the disposition effect, i.e., investors’ tendency to sell winning assets too early and losing assets too late, and its common empirical measure, namely a positive difference between the proportion of gains and losses re-...

The purpose of this study is to investigate the impact of funding liquidity risk on the banks' risk-taking behavior. To test the hypotheses, we apply the two-step system GMM technique on US commercial banks data from 2002 to 2018. We find that funding liquidity increases the banks' risk-taking...

This paper examines empirically the effect of the level of personal bankruptcy protection in the US on households' demand for financial assets. A Chapter 7 bankruptcy allows protecting the home equity up to a certain limit or "exemption". Previous literature shows that such exemption biases...

I generalize the long-run risks (LRR) model of Bansal and Yaron (2004) by incorporating recursive smooth ambiguity aversion preferences from Klibanoff et al. (2005, 2009) and time-varying ambiguity. Relative to the Bansal-Yaron model, the generalized LRR model is as tractable but more flexible...

The influence of market sentiments on the bankruptcy risk propensity of firms has been extensively explored in the literature. However, less attention has been paid to whether the corporate life cycle plays any role in this nexus. The purpose of this research is to unveil how the corporate...