This paper highlights the present writer's latest research achievements associated with the stock price behavior along with the investor behavior. On the basis of these achievements, the paper carries out an extensive analysis of the 4 critical issues associated with Portfolio Theory, viz. how...

Funding liquidity risk has played a key role in all historical banking crises. Nevertheless, a measure based on publicly available data remains so far elusive. We address this gap by showing that aggressive bidding at central bank auctions reveals funding liquidity risk. We can extract an...

We examine how the presentation of investment results affects risk taking using an experiment in which participants view results either asset by asset or aggregated into a portfolio result. Our experiment examines the investment choices of a nationwide sample of 249 participants in a simulation...

We study the relationship between compensation and risk-taking among finance firms using a neglected insight from principal-agent contracting with hidden action and risk-averse agents. If the sensitivity of pay to stock price or slope does not vary with stock price volatility, then total...

Valuation signals have been among the most popular between equity portfolio managers. Given the large variation of techniques and theories with regard to how value is measured, this study investigates the efficacy of alternative value measures. We consider a cross section of simple and...

This paper assesses the level of sophistication evident in investment choices of a large sample of individuals drawn from three Australian retirement savings funds. Available US and UK evidence is somewhat mixed on both the measures that should be used when measuring the sophistication as well...

We assess how owner's commitment to a firm influences the firm cost of capital, and whether the relation between the former and the latter is the consequence of the owner's higher opportunity cost of capital resulting from under-diversification. Using data on private Mediterranean firms and...

This paper aims at investigating issues of asset allocation and equity trading risk in the Gulf Cooperation Council (GCC) stock markets. The intent of this work is to bridge the gap in current asset market liquidity risk management methodologies and to assist GCC financial institutions in...

This paper demonstrates that the IRR is a biased indicator of expected profits for Value Averaging (VA) and for any other dynamic strategy which is based on a target return or profit level, or which takes profits or “doubles down” following losses. The modified IRR is similarly biased. VA is...

Drug discovery and development is a risky and time-consuming process. Typically, a new product costs around $1.3 billion and takes 15–20 years to reach the shelves, while an overwhelming majority of innovations fail along the way. The probability of attaining a US Food and Drug Administration...