In this paper we investigate portfolio optimization under Value at Risk, Average Value at Risk and Limited Expected Loss constraints in a continuous time framework, where stocks follow a geometric Brownian motion. Analytic expressions for Value at Risk, Average Value at Risk and Limited Expected...

English Abstract: We estimate systemic risk in the Korean economy using the econometric measures of commonality and connectedness applied to stock returns. To assess potential systemic risk concerns arising from the high concentration of the economy in large business groups and a few...

This paper derives a multibeta representation theorem for pricing assets using arbitrary reference variables that are not necessarily the true factors. Under this theorem, the upper bound on pricing deviations depends upon the correlations not only between the reference variables and the factors...

This paper compares downside risk measures that incorporate higher return moments with traditional risk measures such as standard deviation in predicting hedge fund failure. When controlling for styles, performance, fund age, size, lockup, high-water mark, and leverage, we find that funds with...

Mean-variance criteria remain prevalent in multi-period problems, and yet not much is known about their dynamically optimal policies. We provide a fully analytical characterization of the optimal dynamic mean-variance portfolios within a general incomplete-market economy, and recover a simple...

Models with event risk (the possibility of sudden large price movements) have proven important for option pricing (e.g., Bates (1996))and optimal portfolio selection (e.g., Liu, Longstaff and Pan(2003)). However, most of the existing studies ignore transaction costs which are prevalent in almost...

We use mutual fund manager data from the technology bubble to examine the hypothesis that inexperienced investors play a role in the formation of asset price bubbles. Using age as a proxy for managers' investment experience, we find that around the peak of the technology bubble, mutual funds run...

We study effects of using Sharpe ratio as a performance measure for compensating money managers in a dynamic and frictionless market setting. First, we demonstrate that with such a performance measure, the manager's focus on the short horizon performance is detrimental to the investor's long...

Models play an important role in strategic asset allocation (SAA), however by too much trust in the model stability, results are typically not so useful for practitioners. Professionals usually face the challenging problem of choosing a SAA model that matches their goals, bearing the operational...

Mutual fund portfolio decisions depend on previous trades of other funds with outstanding past performance: funds mimic the mutual fund industry leaders. Controlling for other factors, for each dollar leaders invest in a given stock, the follower funds invest 15 to 30 cents in the subsequent...