100 years ago this year, Irving Fisher adhered to 'price movements being imperfectly foreseen' resulting in short term deviations from UIP, which in the longer term are averaged away. In this paper, we first review Irving Fisher's seminal work on UIP and on the closely related equation linking...

In this paper, we first review Irving Fisher's seminal work on UIP and on the closely related equation linking interest rates and inflation relation. We go on to re-examine the performance of UIP since the advent of floating exchange rates in the 1970s. Like Fisher a century ago, we find that...

An increase in correlation during turbulent market conditions implies a reduction in the benefits arising from portfolio diversification. Unfortunately, it is exactly then that these benefits are most needed. We investigate the robustness of recent empirical results that indicate correlation...

In this paper we develop an asset allocation model which allocates assets by maximising expected return subject to the constraint that the expected maximum loss should meet the Value-at-Risk limits set by the risk manager. Similar to the mean-variance approach a performance index like the Sharpe...

This paper empirically models a number of emotional assets in the optimal investment decision. Using the spanning techniques we analyze how these emotional assets add to the risk-return profile of investors. We find highly significant results for art, wine and books as a significant allocation...

To ensure a competent regulatory framework with respect to Value-at-Risk for establishing Bank's capital adequacy requirements, as promoted by the Basle Committee, then the parametrical approach to estimate VaR needs to incorporate fat tails, apparent in the return distributions of financial...

Using data on Asian equity markets, we observe that during periods of financial turmoil, deviations from the mean-variance framework become more severe, resulting in periods with additional downside risk to investors. Current risk management techniques failing to take this additional downside...

A number of studies have provided evidence of increased correlations in global financial market returns during bear markets. Other studies, however, have shown that some of this evidence may be biased. We derive an alternative to previous estimators for implied correlation that is based on...

Benefits to portfolio diversification depend crucially on correct correlation estimates, hence it is of great importance to both risk management and portfolio optimisation that the exact nature of the correlation structure between international financial assets is understood. Recent discussion...

Financial well-being is distinct from income. Some people with high incomes suffer low financial well-being, as their incomes fall short of their aspirations. Such people feel propelled to reach their aspirations by taking risk and willing to bear losses. Conversely, some people with low incomes...