Multifactor funds, which offer factor diversification neatly packaged in one product, have a rather short but poor track record; these funds have largely underperformed widely-available broad market funds. This article evaluates the performance of multifactor funds relative to two homemade factor...

Academics, practitioners, and investors at large typically have a preference for making decisions based on a single variable that is supposed to be maximized or minimized. This approach is usually appropriate but it may also be misleading. When selecting an optimal retirement strategy a retiree...

Using a suitable Hull and White type formula we develop a methodology to obtain a second order approximation to the implied volatility for very short maturities. Using this approximation we accurately calibrate the full set of parameters of the Heston model. One of the reasons that makes our...

Although liquidity and informational efficiency, among others, are important characteristics of a securities market, they are not, or should not be, ends in themselves. From a normative point of view, the ultimate goal is to maximize the welfare of society. Therefore, the critical question about...

Beta has been a controversial measure of risk ever since it was proposed almost half a century ago, and we do not pretend to settle with this article what decades of research has not. We do, however, take advantage of the recent trend of investing in countries and industries through index funds...

The predictability of the equity risk premium is a central and controversial issue in finance. The Risk Premium Factor model is a recent and novel approach to forecasting the equity risk premium and the equity market's level and P/E. This article aims to overcome the main limitation of, and...