Investors are inextricably linked to financial institutions, money managers, and the products they market. Mutual funds, exchange-traded funds (ETFs), hedge funds, and pension funds manage or hold roughly $55 trillion in combined wealth. This chapter examines these topics with a behavioral...

Asset allocation models have evolved in complexity with the development of modern portfolio theory, but they continue to operate under the assumption of investor rationality and other assumptions that do not hold in the real world. For this reason, academics and industry professionals make...

Around the globe, the gradual move from defined benefit pensions to defined contribution pensions has increased the need for individual retirement planning. Examples of this include U.S. savings rates at historic lows, poor retirement prospects for citizens in developed countries, and the...

In the oversight of most funds, the portfolio manager holds the key decision-making power. Often regarded as foundational to the investment process, a few select managers can attract billions of dollars from investors, giving the managers increased prominence, credibility, and compensation....

This chapter focuses on the attitude of investors toward financial gains and losses and their decisions on wealth allocation, and how these changes are subject to behavioral factors. The focal point is the integration of behavioral elements into the classic portfolio optimization. Individual...

Asset allocation and portfolio diversification decisions have important welfare and policy implications. This chapter reviews studies that examine three key aspects of financial investing: participation in stock markets, portfolio diversification, and trading behavior. Standard finance theory...

The chapter describes investment and trading strategies rooted in behavioral finance that historically have generated superior profits. The failure of traditional finance models, such as those based on purely rational behavior, to explain how markets work has enabled behavioral finance to move...

This paper contains facts and introductory concepts on Asset and Liability Management, Funds Transfer Pricing Systems and Funding Costs. Banks, hedge funds and more generally finance companies engage in complex capital market activities that involve trading of instruments in derivative or cash...

Noted economist, Harry Markowitz (“Markowitz) received a Nobel Prize for his pioneering theoretical contributions to financial economics and corporate finance. His innovative work established the underpinnings for Modern Portfolio Theory — an investment framework for the selection and...

We provide some new tools to evaluate trading strategies. When it is known that many strategies and combinations of strategies have been tried, we need to adjust our evaluation method for these multiple tests. Sharpe Ratios and other statistics will be overstated. Our methods are simple to...