Fundamental stock analysts covering the insurance industry may be overly influenced by infrequent large scale catastrophes, such as unusually strong hurricanes. It is important for these analysts to be able to put catastrophes in financial perspective in order to set an appropriate fair value on...

Ideally, an index fund should provide the best possible tradeoff between expected return and risk for the investor who has no research advantage. A number of practical problems arise, however, when one attempts to translate this ideal into practice. Even in the absence of a research advantage, a...

An idealized model of the investment process redefines the respective roles of security analysts and portfolio managers, quantifies such concepts as activity and aggressiveness, and explains how the individual analyst's efforts at forecasting returns translate into improved portfolio performance

This article provides empirical support for the theory that closed-end fund discounts reflect expected investment performance. Evidence is presented to explain how equity closed-end fund initial public offerings (IPOs) can sell at a premium when existing funds sell at a discount and why the...

Fixed-income analysis begins with the term structure. Issues arise as to the methodology for estimating a term structure. Practitioners seem to want a method that is easy to implement, reliable, accurate, and appropriate for their particular niche (e.g., hedging, mortgage-backed, trading, or...

There is some threshold level of competence among multiple active managers above which an inventory fund will be superior to an index fund. When active managers' trades are genuinely valuable, however, a better approach is to treat them as sources of estimates, not transactions, combining...

The authors charge that investment managers overwhelm potential clients with theories and statistical tests that strongly suggest their good past performance was no accident and will continue. They contend that experience suggests otherwise and that both statistics and theory can seem quite...

Should an investor buy and hold a stock index? Hold the index plus a put on the index (portfolio insurance)? Or hold the index plus a short position in a call on the index (a covered write)? Which strategy will be the most efficient in terms of the tradeoff between risk and return? Which will...