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...

A model-based assessment of credit risk is subject to both specification and calibration errors. Focusing on a well known credit risk model, we propose a methodology for quantifying the relative importance of alternative sources of such errors and apply this methodology to a large data set. We...

This paper reproduces the performance of two international shipping stock indexes and two physical shipping indexes by investing only in stock portfolios that our algorithms determine. In our analysis, we use daily stock data and address the index-tracking problem with the differential evolution...

Owners of non-publicly-traded businesses who face significant external financing costs should have a hedging preference for financial assets whose returns are positively correlated with self-financing needs. If this effect is aggregated, expected returns on financial assets should correspond...

Portfolio allocation with gross-exposure constraint is an effective method to increase the efficiency and stability of selected portfolios among a vast pool of assets, as demonstrated in Fan et. al. (2008b). The required high-dimensional volatility matrix can be estimated by using high frequency...

From the individual to the largest organization, everyone today has to make investments in IT. Making a smart investment that will best satisfy all the necessary decision-making criteria requires careful and inclusive analysis. This textbook provides an up-to-date, in-depth understanding of the...

This paper assesses how shocks to bank capital may influence a bank's portfolio behaviour using novel evidence from a UK bank panel data set from a period that pre-dates the recent financial crisis. Focusing on the behaviour of bank loans, we extract the dynamic response of a bank to innovations...

Classical performance attribution methods decompose manager alpha into factor allocation and stock selection components. A manager can produce alpha through factor tilts relative to a benchmark and by stock selection within each factor. However, traditional attribution methods do not explicitly...

The theory of capital (long-term) assets value (Sharpe, 1964, Lintner, 1965, Mossin, 1966), based on G. Markovitz's model (Markovitz, 1952,1059), has served for many years as the basis for valuations in the investment analysis and corporate finance. However, implicitly, this theory contains an...

This paper derives in closed form the optimal dynamic portfolio policy when trading is costly and security returns are predictable by signals with dierent mean-reversion speeds. The optimal updated portfolio is a linear combination of the existing port- folio, the optimal portfolio absent...