Bitcoin is an exciting new financial product that may be useful for inclusion in investment portfolios. This paper investigates the implications of replacing gold in an investment portfolio with bitcoin (“digital gold”). Our approach is to use several different multivariate GARCH models...

We provide an accurate closed-form expression for the expected shortfall of linear portfolios with elliptically distributed risk factors. Our results aim to correct inaccuracies that originate in Kamdem (2005) and are present also in at least thirty other papers referencing it, including the...

This paper applies the mean-variance portfolio optimization (PO) approach and the stochastic dominance (SD) test to examine preferences for international diversification versus domestic diversification from American investors’ viewpoints. Our PO results imply that the domestic diversification...

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...

I investigate the question of how to construct a benchmark replicating portfolio consisting of a subset of the benchmark’s components. I consider two approaches: a sequential stepwise regression and another method based on factor models of security returns´ first and second moments. The first...

In asset management, the portfolio leverage affects performance, and can be subject to constraints and operational limitations. Due to the possible leverage aversion of the investors, the comparison between portfolio performances can be incomplete or misleading. We propose a procedure to...

This paper addresses two practical investment questions: Is investing in the diamond equity market a more feasible and liquid alternative to investing in diamonds? Additionally, is diamond equity affected by polished diamond prices? We assemble an original database of diamond mining stock prices...

The trend towards eliminating defined benefit (DB) pension plans in favour of defined contribution (DC) plans implies that increasing numbers of pension plan participants will bear the risk that final realized portfolio values may be insufficient to fund desired retirement cash flows. We compare...

In this paper, we construct a sample of news co-occurrences using big data technologies. We show that stocks that co-occur in news articles are less risky, bigger, and more covered by financial analysts, and economically-connected stocks are mentioned more often in the same news articles. We...