We propose a joint modeling strategy for timing the joint distribution of the returns and their volatility. We do this by incorporating the potentially asymmetric links into the system of 'independent' predictive regressions of returns and volatility, allowing for asymmetric cross-correlations,...

The paper analyzes the intensity of choice in an agent based financial optimization problem. Mean-variance optimizing agents choose among mutual funds of similar styles but varying performance. We specify a model for the allocation of new funds, switching between funds, and withdrawals and...

In this paper, we use Bayesian nonparametric learning to estimate the skill of actively managed mutual funds and also to estimate the population distribution for this skill. A nonparametric hierarchical prior, where the hyperprior distribution is unknown and modeled with a Dirichlet process...

We build a two-country model with imperfect financial intermediation. Banks face limits to arbitrage which lead to positive excess returns in the investment markets and a risk premium in the international credit market. Gross capital flows affect the exchange rate since banks are balance sheet...

Using duration analysis and CAPM, this paper seeks to estimate the length of time performance measures affect the probability of a mutual fund liquidating. Data was collected on small cap growth funds from 1980-Nov. 2000 using the Sharpe Ratio to estimate the probability that a mutual fund...

Morningstar, Inc., has been hailed in both academic and practitioner circles as having the most influential rating system in the mutual fund industry. We investigate Morningstar’s influence by estimating the value of a star in terms of the asset flow it generates for the typical fund. We use...

Due to differences in financial sophistication and agency relationships, we posit that investors use different criteria to select portfolio managers in the retail mutual fund and fiduciary pension fund industry segments. We provide evidence on investors’ manager selection criteria by...

One of the most enduring questions in finance is the persistence of investment risk across time. Traditional finance lacks of recipes on how to approach and how to hedge non-diversifiable risks. Risks that can not be diversified at a given point in time can nevertheless be averaged over time...

We give a precise operational definition to three requirements the Basel Committee on Banking Supervision specifies for stress tests: Plausibility and severity of stress scenarios as well as suggestiveness of risk reducing actions. The basic idea of our approach is to define a suitable region of...

We examine how an innovation in payment technology impacts on consumer payment choice and cash demand. We study the staggered introduction of contactless debit cards between 2016-2018. The timing of access to the contactless technology is quasi-random across clients, depending only on the expiry...