Who are mutual fund investors? The answer is critical to regulatory policy. The mutual fund industry portrays fund investors as diligent, fairly sophisticated, and guided by professional financial advisors. The SEC paints a more cautious portrait of fund investors, though touts improved...

It has become almost conventional wisdom that investors should avoid funds with high expense ratios. Like many nuggets of conventional wisdom, there is some truth, but many exceptions: some of the best funds come at the price of higher expense ratios. Financial planners need this type of...

Assuming a client’s goals, resources, and constraints have been clearly identified, when constructing an asset allocation instead of using a generic efficient frontier a client should have his or her own efficient frontier. What is efficient for one person may not be efficient for another. In...

Historically, the practice of trustees of defined benefit programs has been to make the asset allocation decision based on prevailing risk-return relationship for asset classes without regard to the plan’s economic funded ratio, liability structure, and liability economic growth rate. Once the...

Asset allocation advisers usually use the mean-variance framework to show the benefits of investing in hedge funds. The authors prove that this is not optimal when the assets are not normally distributed and develop a method based on a modified Value-at-Risk for non-normally distributed assets....

In this, the fourth article in the economists’ hubris paper series, we look at the contributions of academic thought to the field of asset management. We find that while the theoretical aspects of the modern portfolio theory are valuable, they offer little insight into how the asset management...

The current financial crisis has strongly affected the financial status (expressed by the funding ratio) of the pension funds and their ability to grant full indexation of the liabilities to inflation rate. The indexation benefits represent a priority for a participant of a pension fund bearing...

This paper uses Hansen and Jagannathan's (1991) volatility bounds to evaluate models with idiosyncratic consumption risk. I show that idiosyncratic risk does not change the volatility bounds at all when consumers have CRRA preferences and the distribution of the idiosyncratic shock is...

Do investors confuse the quality of a firm with its attractiveness as an investment? If so, shares of well-run companies will be bid up too high and subsequently earn negative abnormal returns. Our analysis of Fortune magazine's annual survey of quot;America's Most Admired Companiesquot; for...

In this paper, we investigate whether the international version of CAPM can price rational and irrational sentiments of U.S. individual and institutional investor sentiments. The results show that the CAPM prices rational sentiments driven by fundamentals and irrational sentiments not driven by...