Growing experimental evidence suggests that loss aversion plays an important role in asset allocation decisions. We study the asset allocation of a linear loss-averse (LA) investor and compare the optimal LA portfolio to the more traditional optimal mean-variance (MV) and conditional...

With the elimination of foreign exchange risk among the E.M.U.-member countries, the yield of, say, French benchmark government bonds (henceforth, the yield) should be equal to that of German bonds, plus some credit and liquidity premia. Since both premia are not likely to change substantially...

We analyze foreigners' and domestic institutional investors' positions in U.S. equities. Controlling for many factors, we uncover a common preference for large firms and firms that are diversified internationally. The domestic preference for internationally diversified firms implies that...

We explore the link between international stock market comovement and the degree to which firms operate globally. Using stock returns and balance sheet data for companies in 20 countries, we estimate a factor model that decomposes stock returns into global, country-specific and industry-specific...

Prior research documented that U.S. stock prices tend to grow faster during Democratic administrations than during Republican administrations. This letter examines whether stock returns in other countries also depend on the political orientation of the incumbents. An analysis of 24 stock markets...

Deviations from normality in financial return series have led to the development of alternative portfolio selection models. One such model is the downside risk model, whereby the investor maximizes his return given a downside risk constraint. In this paper we empirically observe the...

Assessments of investors' risk appetite/aversion stance via indicators often yields results which seem unsatisfactory (see e.g. Illing and Aaron (2005)). Understanding how such indicators work therefore seems essential for further improvements. The present paper seeks to contribute to this...

The year 2000 started the evolution of the German market for Structured Products with incorporated Hedge Fund exposures. This paper provides an extensive commentary on this fast growing segment. Our analysis suggests that the market for existing products is affected by significant heterogeneity....

Most research on the performance and risk of hedge funds are based on calculations that just use the data from one index provider. Also most product providers and even more and more investors are using hedge fund indices for benchmarking purposes. As some academic articles pointed out, the world...

The investment in commodities is starting to be more important during the last years. The paper describes the characteristics of financially important commodities. In many cases a passive investment in an index is most suitable. As the GSCI is found to be the most important, its underlying...