The seminal work by Markowitz in 1959 introduced portfolio theory to the world. The prevailing notion since then has been that portfolio risk is non linear i.e. you cannot use Linear Programming (LP) to optimize your portfolio. We will in this paper show that simple portfolio drawdown...

The goal of this paper is to present an original and simple analysis aimed to understand why investing in capital markets can be very dangerous for "naive investors". Stock markets display often exploding volatility. They are characterized by instability and subject to external shocks. If...

Although bonds are less volatile than equities and the median bond fund holds about 200 bonds, bond investors still need to hold more than one bond fund to realize the optimal benefit of diversification. The simulation results show that three to five bond funds reduce standard deviation of...

The liquidity of an asset in modern financial markets is a key and, yet, elusive concept. A market is often said to be liquid when the prevailing structure of transactions provides a prompt and secure link between the demand and supply of assets, thus delivering low costs of transaction....

Common stock valuation presents one of the most complex tasks in financial analysis. When it attempts to answer on question: „what causes stock price movements? “Then the answer would not relate only on economic factors. There are numerous factors that affect the stock price and they are...

The recent financial crisis renewed concerns about a possible destabilizing impact of derivatives trading. Despite a very active research, the question whether or not derivatives tend to destabilize financial markets has not yet been answered to satisfaction. This contribution aims to revise the...

This contribution studies the application of heteroskedasticity robust estimation of Vector-Autoregressive (VAR) models. VAR models have become one of the most applied models for the analysis of multivariate time series. Econometric standard software usually provides parameter estimators that...

I/O models have been widely used to assess the impacts of many changes in an economy. An I/O model is also an important tool to make forecasts and the results from an I/O model are very helpful in many policy-making processes. Many scientific findings in economics have to give credit to the I/O...

Prior research reports a remarkable homogeneity of hedge fund performance rankings produced by common risk-adjusted performance ratios. The paper at hand contributes to the discussion by studying the behavior of, and the relationship between these performance ratios over the time period from...

While conventional academic finance emphasizes theories such as Modern Portfolio Theory (MPT) and the Efficient Market Hypothesis (EMH), the emerging field of behavioral finance investigates the cognitive factors and emotional issues that impact the decision-making process of individuals,...