The main objective of this study is to classify economic sectors using the clustering method, and to validate the classification from an economic point of view. The method is intended to create clusters, or portfolios, whose components show similar characteristics. The method also allows...

This paper explores the performance of a global minimum variance (GMV) portfolio in dependence of the structure of the covariance matrix and the type of volatility model. We investigate quantitative portfolio strategies based on patterns of the covariance matrix, especially a diagonal covariance...

This paper describes a study, in which we examine the diversification behavior of financial advisors. Learning from BENARTZI and THALER (2000) about investors' naive diversification strategies, we find evidence that the advisor's asset allocation can be described by a new behavioral portfolio...

A large body of evidence indicates that macroeconomic and financial variables are dynamically interrelated. In an international setup, we analyze the impacts of macroeconomic shocks on various sector indices of the Swiss stock market. We use a VECM model to disentangle local and foreign as well...

To obtain the maximum benefits from diversification, financial theory suggests that investors should invest internationally because of the larger potential for risk reduction. The question that we raise in this paper is how to select the optimal portfolio of countries? This article synthesizes...

For plain vanilla options the martingale pricing formulae are usually expressed in terms of artificial probabilities using different numeraires. Firstly, this allows fuuml;r a concise and intuitive representation of the pricing equation. Secondly, it is of major importance for computational...

It is a common belief, especially among financial industry professionals, that hectic periods in financial markets are accompanied by modifications in the risk factors dependence structure. We consider correlation as a proxy fuuml;r measuring dependence and use for empirical study representative...

Estimation of the covariance matrix is an essential task of portfolio selection. A multivariate approach is needed. Unfortunately, it is leading to a flat likelihood function for a realistic number of assets. This paper is proposing a principal components analysis together with a sophisticated...

The study analyses the characteristics of professional exchange rate forecasts for the /US-$ rate. The results indicate that the quality of forecasts produced by professional economists is rather poor and incompatible with the rational expectations hypothesis. This dismal result is according to...

This paper proposes to include corporate governance characteristics in the explanation of underpricing at the time of IPOs. It shows that the investment banks and the issuers take the characteristics of the corporate board into account when valuing the issue, while investors adjust for the...