Diversification has been long considered an essential part of investing for the long term. Our paper aims to look further on portfolio diversification and how asset allocation can be optimized. We suggest that the selection of investments in a portfolio should be based on how the market behaves...

The forward perspectives for the 60/40 portfolio have deteriorated, since secular tailwinds (that have benefited equities) are fading and stock-bond correlation may become positive. For this reason, allocating to uncorrelated strategies seems rational. In this paper we develop a long-only...

With the collapse of LTCM in 1998, global macro investing / trading suffered a severe blow in terms of acceptance in the markets. Because of many highly leveraged hedge funds, investors and counterparts lost serious money, markets were at the brink of destabilisation and the regulators had to...

The long-run relationship between money and prices in the euro area embedded in traditional money demand models with income and interest rates broke down after 2001. We develop a money demand model where investors hold a diversified portfolio with money, domestic and foreign stocks and long-term...

Returns merely based on one purchasing price of an asset are uninformative for people regularly contributing to their old-age provision. Here, each purchase has an influence on the outcome. Still, they are commonly used in finance literature, giving an overly optimistic view of expected...

Returns merely based on one purchasing price of an asset are uninformative for people regularly contributing to their old-age provision. Here, each purchase has an influence on the outcome. Still, they are commonly used in finance literature, giving an overly optimistic view of expected...

Motivated by standard portfolio theory, this paper incorporates ex-ante volatility estimates in the construction of winner-minus-loser stock momentum portfolio. I find that over the 1927-2015 period this leads to an increase in the Sharpe ratio from 0.34 to 1.14 and strongly reduced crash risk....

A low-interest rate environment induces higher demand for income-generating assets, such as high-dividend stocks and high-coupon bonds. In this paper, we explore the impact of this “reaching-for-income” phenomenon on fund flows of corporate bond mutual funds. We find that high...

Recent empirical evidence suggests that value and momentum strategies generate significantexcess returns in emerging markets. We confirm these results and extend them in severaldirections. First, we examine a broader range of stock selection strategies, including strategiesbased on analysts'...

This is the first paper analyzing the impact of index momentum factors on the performance of international and global equity funds. Extending an international, index-based version of the Fama and French (1993) three-factor model by adding the factors of country momentum and sector momentum, we...