The arithmetic mean-variance frontier shows that taking more risk is always rewarded with higher expected arithmetic return. This article shows that there is a danger from being too aggressive that is not reflected in the arithmetic return mean-variance frontier because expected arithmetic...

This article provides empirical support for the theory that closed-end fund discounts reflect expected investment performance. Evidence is presented to explain how equity closed-end fund initial public offerings (IPOs) can sell at a premium when existing funds sell at a discount and why the...

It is often argued in defense of Risk Parity portfolios that they maximize the Sharpe ratio if their securities have identical Sharpe ratios and identical correlations. However, securities have neither identical Sharpe ratios nor this correlation structure. In realistic markets, Risk Parity...

This paper proposes that, and explains why, hedge profits and regression approach hedge ratios should be calculated using cost-of-carry-adjusted price changes. This Modified Regression Method for determining hedge ratios is denoted MRM. The paper discusses the Error-Correction Model for hedge...

The arithmetic mean-variance efficient frontier shows that taking more risk is always rewarded with higher expected arithmetic return. However, expected arithmetic return is a poor indicator of long-term arithmetic return, which corresponds to expected continuous return. For the continuous...

An acorn fell on Chicken Little's head, and he concluded that the sky was falling. Stocks' return correlations have moved toward one at times, and current day Chicken Littles have concluded that, when this happens, alpha opportunities are diminished. Both conclusions make about the same amount...