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Chapter 10 Arbitrage, state prices and portfolio theory
Dybvig, Philip H.; Ross, Stephen A. - 2003
equivalence of absence of arbitrage, the existence of a positive linear pricing rule, and the existence of an optimum for some …
Persistent link: https://www.econbiz.de/10014023861
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The Dynamics of Financially Constrained Arbitrage
Gromb, Denis - 2017
. We show that the dynamics of arbitrage capital are self-correcting: following a shock that depletes capital, returns … respect to arbitrage capital. Diversification of arbitrageurs across markets induces contagion, but generally lowers …
Persistent link: https://www.econbiz.de/10012949344
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Hedge funds and the positive idiosyncratic volatility effect
Bali, Turan G.; Weigert, Florian - 2021 - This version: December 2020
While it is established that idiosyncratic volatility has a negative impact on the cross-section of future stock returns, the relationship between idiosyncratic volatility and future hedge fund returns is largely unexplored. We document that hedge funds with high idiosyncratic volatility...
Persistent link: https://www.econbiz.de/10012416051
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Synthetic leverage and fund risk-taking
Fricke, Daniel - 2021
Mutual fund risk-taking via active portfolio rebalancing varies both in the cross-section and over time. In this paper, I show that the same is true for funds' off- balance sheet risk-taking, even after controlling for on-balance sheet activities. For this purpose, I propose a novel measure of...
Persistent link: https://www.econbiz.de/10012489580
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Optimal Investment, Derivative Demand and Arbitrage Under Price Impact
Anthropelos, Michail - 2018
neither closed nor convex. Regarding hedging, non-linear hedging costs motivate the study of arbitrage free prices for the … of price impact. Additionally, we show arbitrage opportunities, should they arise from claim prices, can be exploited … only for limited position sizes, and may be ignored if outweighed by hedging considerations. We also show that arbitrage …
Persistent link: https://www.econbiz.de/10012906898
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Hedge fund flows and performance streaks : how investors weigh information
Baquero, Guillermo; Verbeek, Marno - 2015
We examine the relative weights hedge fund investors attach to past information in the fund selection process. The weighting scheme appears inconsistent with econometric forecasting models that predict fund returns, alphas or Sharpe ratios. In particular, investor flows are highly sensitive to...
Persistent link: https://www.econbiz.de/10010471775
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Delegated portfolio management, optimal fee contracts, and asset prices
Sato, Yuki - 2015
This paper proposes a model of asset-market equilibrium with portfolio delegation and optimal fee contracts. Fund managers and investors strategically interact to determine funds' investment profiles, while they share portfolio risk through fee contracts. In equilibrium, their investment...
Persistent link: https://www.econbiz.de/10011293478
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Do Mutual Funds Perform When it Matters Most to Investors? U.S. Mutual Fund Performance and Risk in Recessions and Expansions
Kosowski, Robert - 2011
This paper shows that the stylized fact of average mutual fund underperformance documented in the literature stems from expansion periods when funds have statistically significant negative risk-adjusted performance and not recession periods when risk-adjusted fund performance is positive. These...
Persistent link: https://www.econbiz.de/10013121165
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UK Equity Mutual Fund Alphas Make a Comeback
B. Mateus, Irina - 2016
In this study we re-visit the performance of 887 active UK equity mutual funds using a new approach proposed by Angelidis, Giamouridis and Tessaromatis (2013). The authors argue that mutual funds stock selection is driven by the benchmark index, so if the benchmark generates alpha, there will be...
Persistent link: https://www.econbiz.de/10013001539
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Expectations of Active Mutual Fund Performance
Dahlquist, Magnus - 2020
We recover a forward-looking distribution of expected abnormal returns (alphas)for active equity mutual funds from analyst ratings. Professional analysts believe thatalphas are dispersed, that the average fund will underperform, and that the largestfunds will outperform. We estimate a rational...
Persistent link: https://www.econbiz.de/10012842405