Regulators often set value-at-risk (VaR) constraints to limit the portfolio risk of institutional investors. For some investors, notably pension funds, the VaR constraint is enforced over a horizon which is significantly shorter than the investment horizon of the investor. Our paper aims to...

There has been a long debate about whether speculators are stabilizing or not. We consider a model where speculators have a stabilizing role in normal times, but may also provoke large risk panics. The very feature that makes arbitrageurs liquidity providers in normal times, namely their...

Herd behavior is often viewed as a significant threat for the stability and effciency of financial markets. This paper sheds new light on the relevance of herd behavior for observed correlation of trades. We introduce numerical simulations of a herd model to derive theory-guided predictions...

This paper explores French assets returns predictability within a VAR setup. Using quarterly data from 1970Q4 to 2006Q4, it turns out that bonds, equities and bills returns are actually predictable. This feature implies that the investment horizon does indeed matter in the asset allocation. The...

We use a unique and comprehensive data set on open-end real estate funds in Germany to study a liquidity crisis that hit this industry between 2005 and 2006. Since this industry is comparably unregulated our data set permits us to contrast competing explanations of liquidity crisis. We find that...

This paper sheds new light on herding of institutional investors by using a unique database that identifies every transaction made by financial institutions in the German stock market. First, the analysis reveals that herding behavior of institutions occurs daily. Second, replication of the...

This paper studies the flow-performance relationship of three different investor groups in mutual funds: Households, financial corporations, and insurance companies and pension funds, establishing the following findings: Financial corporations have a strong tendency to chase past performance and...

There has been a long debate about whether speculators are stabilizing or not. We consider a model where speculators have a stabilizing role in normal times, but may also provoke large risk panics. The very feature that makes arbitrageurs liquidity providers in normal times, namely their...

This paper employs a new and comprehensive data set to investigate short-term herding behavior of institutional investors. Using data of all transactions made by financial institutions in the German stock market, we show that herding behavior occurs on a daily basis. However, in contrast to...

This paper studies the flow-performance relationship of three different investor groups in mutual funds: Households, financial corporations, and insurance companies and pension funds, establishing the following findings: Financial corporations have a strong tendency to chase past performance and...