This paper addresses whether country allocation provides benefits over industry allocation in a sample of European country and industry indexes. Strategy performance is compared using a mean-variance spanning test. We find that, for investors with low risk aversion, industry allocation is as...

The aim of the paper is to analyse the effects of different model specifications, within a general nested framework, on the valuation of defaultable bonds, and some credit derivatives. Assuming that the primitive variables such as the risk-free short rate, and the credit spread are affine...

Milton Friedman argued that irrational traders will consistently lose money, won’t survive and, therefore, cannot influence long run equilibrium asset prices. Since his work, survival and price impact have been assumed to be the same. In this paper, we demonstrate that survival and price...

We investigate the role of asymmetric information in affecting order submission strategies. Order aggressiveness depends on the state of the order book and on the asset dynamics. We find that the most important determinants are the depth on the same side of the book and a momentum indicator....

Combinatorial exchanges have existed for a long time in securities markets. In these auctions buyers and sellers can place orders on combinations, or bundles of different securities. These orders are conjunctive: they are matched only if the full bundle is available. On business-to-business...

We introduce Indirect Robust Generalized Method of Moments (IRGMM), a new simulation-based estimation methodology, to model short-term interest rate processes. The primary advantage of IRGMM relative to classical estimators of the continuous-time short-rate diffusion processes is that it...

An unusually rich source of data on housing prices in Stockholm is used to analyze the investment implications of housing choices. This empirical analysis derives market-wide price and return series for housing investment during a 13-year period, and it also provides estimates of the...

Many fields of modern science and engineering have to deal with events which are rare but have significant consequences. Extreme value theory is considered to provide the basis for the statistical modeling of such extremes. The potential of extreme value theory applied to financial problems has...

During the turmoil in financial markets in late 1998, financial institutions attempting to liquidate positions to meet capital requirements may have faced unexpectedly high bid-ask spreads. In this paper, we investigate the effect on key risk measures (such as the likelihood of insolvency, value...

We use constrained cross-section regressions to disentangle the effects of various factors on international real estate security returns. Besides a common factor, pure country, property type, size, and value/growth factors are considered. The value/growth measure that is used in this paper...