Options should play an important role in asset allocation. They allow for kernel spanning and provide access to additional (priced) risk factors such as stochastic volatility and negative jumps. Unfortunately, traditional methods of asset allocation (e.g. mean-variance optimization) are not...

There has been a long dispute about the relative importance of country versus industry diversification. We test the hypothesis that institutional ownership affects the relative importance of country and industry effects in explaining stock returns worldwide. We find that industry effects become...