Empirical evidence suggests that asset returns correlate more strongly in bear markets than conventional correlation estimates imply. We propose a method for determining complete tail-correlation matrices based on Value-at-Risk (VaR) estimates. We demonstrate how to obtain more efficient...

This paper examines the parity conditions between assets denominated in different currencies, traded in a well-integrated segment of the international capital market, and derives the consequences for exchange rate expectations. The main objective is to assess the uncovered asset return parity...

This note gives the conditions on preferences to guarantee the monotonicity of asset prices when the payoffs of the risky asset change in the sense of the Nth stochastic dominance and with an Nth degree increase in risk. Those conditions are expressed in terms of the sign of the successive...

Most socially responsible investment funds combine a sustainability objective with a tracking error constraint. We characterize the impact of a sustainability constraint on the mean-tracking error efficient frontier and illustrate this on a universe of US stocks for the period 2003–2010.

Estimates of agents’ risk aversion differ between market studies and experimental studies. We demonstrate that these estimates can be reconciled through consistent treatment of agents’ propensity for narrow framing.