This paper analyses the relationship between governance, asset allocation, and risk among state and local government-operated pension systems in the United States of America. It is argued that governance influences investment decisions and risk profiles of public sector pension systems, creating...

Suppose that a group of agents having divergent expectations can share risks efficiently. We examine how this group should behave collectively to manage these risks. We show that the beliefs of the representative agent is in general a function of the group.s wealth level, or equivalently, that...

This Article attempts to define hedge funds and to distinguish them from a variety of similar investment funds. After reviewing the hedge fund definition in the U.S. and the EU, this Article argues that the current regulatory framework, which defines hedge funds by reference to what they are not...

How does sovereign risk affect investors' behavior? We answer this question using a novel database that combines sovereign default probabilities for 27 developed and emerging markets with monthly data on the portfolios of individual bond mutual funds. We first show that changes in yields do not...

Fund managers are paid a fixed management fee in proportion to their assets under management. This means to maximize revenue, managers hoard assets. Whilst this results in increased revenue for the manager often, due to diseconomies of scale, it results in lower returns for the investor. Here we...

This paper studies a novel approach for managing macroeconomic volatility in developing countries based upon dynamic portfolio optimisation. As part of this study, we develop a sovereign risk management model in the context of an Asset-Liability Management (ALM) framework. First, we solve the...

One of the most serious problems that a central bank in an emerging market economy can face is the sudden reversal of capital inflows. Hoarding international reserves can be used to smooth the impact of such reversals, but these reserves are seldom sufficient and always expensive to hold. In...

In the early 1970s, the portfolio theory of exchange rates with rational expectations was introduced to explain the behavior of floating exchange rates. While attractive in principle, the approach failed along with other theories to provide empirically convincing results. Over the years, the...