In this paper, we construct zero cost portfolios based on second and third degree stochastic dominance and show that they produce systematic, statistically significant, abnormal returns. These returns are robust with respect to the single index CAPM, the Fama-French three-factor model, the...

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...

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...

This paper proposes a methodology to analyse the risk and return of large loan portfolios in a joint setting. I propose a tractable model to obtain the distribution of loan returns from observed interest rates and default frequencies. I follow a sectoral approach that captures the heterogeneous...

This paper explores the implications of a novel class of preferences for the behavior of asset prices. Following a suggestion by Marshall (1920), we entertain the possibility that people derive utility not only from consumption, but also from the very act of saving. These “saving-based”...

This paper provides a comprehensive analysis of portfolio choice with popular foreign exchange (FX) investment styles such as carry trades and strategies commonly known as FX momentum, and FX value. We investigate if diversification benefits can be achieved by style investing in FX markets...

This paper provides a comprehensive analysis of portfolio choice with popular foreign exchange (FX) investment styles such as carry trades and strategies commonly known as FX momentum, and FX value. We investigate if diversification benefits can be achieved by style investing in FX markets...

This paper uses stochastic dominance (SD) analysis to examine whether Islamic stock indexes outperform conventional stock indexes by comparing nine Dow Jones Islamic indexes to their Dow Jones conventional counterparts: Asia Pacific, Canadian, Developed Country, Emerging Markets, European,...

This paper proposes a new dividend-based S&P 500 Index return predictor, the implied dividend yield term structure (IDYTS). We show that the IDYTS is a “cleaner” predictor than its conventional counterpart, the dividend price ratio (DP), in that the expected return is a linear combination...

We design average portfolio insurance (API) strategies with an investment floor and a buffer that is a power of a geometric average of the underlying asset price. We prove that API strategies are optimal for investors with hyperbolic absolute risk aversion who become progressively more risk...