We analyze the problem of real optimal asset allocation for a pension fund maximising the expected CRRA utility of its real disposable wealth. The financial horizon of the analysis coincides with the random death time of a representative subscriber. We consider a very general setting where there...

We develop a simple rational model of active portfolio management that provides a natural benchmark against which to evaluate observed relationship between returns and fund flows. Many effects widely regarded as anomalous are consistent with this simple explanation. In the model, investments...

The classic Lucas asset pricing model with complete markets stresses aggregate risk and, hence, fails to investigate the impact of agents heterogeneity on the dynamics of the equilibrium quantities and measures of trading volume. In this paper, we investigate under what conditions...

In this paper we analyse recovery rates on defaulted bonds using the Standard and Poor’s/PMD database for the years 1981-1999. Due to the specific nature of the data (observations lie within 0 and 1), we must rely on nonstandard econometric techniques. The recovery rate density is estimated...

Much of the traditional economic theory of insurance is based on the assumption that the risk against which insurance is to be purchased is entirely exogenous. This is usually modelled by simply allowing the individual to include insurance as a mechanism of covering risk, without any real...

This paper explores the prices of three aesthetic externalities (the presence of a water view, the appearance of nearby improvements, and the quality of landscaping in the neighborhood) in residential property markets. In particular, we focus on how the implicit prices of such characteristics...

The rapid growth of the use of options in portfolio management has been accompanied by a variety of claims regarding the performance of options strategies. In particular, many investors believe that they can enhance the performance of their pure-stock portfolios using systematic covered-call...

We study a test statistic on the integrated squared difference between a kernel estimator of the copula density and a kernel smoothed estimator of the parametric copula density. We show for fixed smoothing parameters that the test is consistent and that the asymptotic properties are driven by a...

This paper proposes a Kolmogorov-type test for the shortfall order (also known in the literature as the right-spread or excess-wealth order) against parametric alternatives. In the case of the null hypothesis corresponding to the Negative Exponential distribution, this provides a test for the...

Municipal bonds trade in opaque, decentralized broker-dealer markets in which price information is costly to gather. Whether dealers in such a market operate competitively is an empirical issue, but a difficult one to study. Data in such markets is generally not centrally recorded. We analyze a...