Insurance companies often follow highly correlated investment strategies. As major investors in corporate bonds, their investment commonalities subject investors to fire-sale risk when regulatory restrictions prompt widespread divestment of a bond following a rating downgrade. Reflective of...

This study proposes methodological adjustments to the widely adopted performance benchmarking methodology of Daniel et al. (1997) as a means of improving the precision of alpha measurement for active equity fund managers. We achieve this by considering the monthly updating of characteristic...

Conventional wisdom, reflected in firm, investment bank, and court practice and the way academics teach corporate finance, suggests that the equity cost of capital varies considerably across firms. This practice builds on a vast amount of evidence on expected rate of return differences between...

Institutional investors in equities tend to follow well-defined investment strategies, often based on factors such as size, value, momentum, quality, dividend yield and other stock characteristics. This paper explores the impact of capital flows between investment strategies on the cross-section...

We introduce a portfolio friction in a two-country DSGE model where investors face a constant probability to make new portfolio decisions. The friction leads to a more gradual portfolio adjustment to shocks and a weaker portfolio response to changes in expected excess returns. We apply the model...

This study focuses on the diversification benefits of the most developed equity markets of Central and Eastern Europe (CEE). To evaluate these benefits of diversification we use so-called spanning tests based on a stochastic discount factor approach and estimated by General Methods of Moments...

We explore how the demand for a risky asset can be decomposed into an investment effect and a hedging effect by all risk-averse investors. This question has been shown to be complex when considered outside of the mean-variance framework. We restrict dependence among returns on the risky assets...