Hedge Funds are often considered as a possibility for optimizing traditional portfolios due to their alternative risk factors and sources of return. But as the return distribution of hedge funds shows negative skewness and excess kurtosis, using portfolio optimization techniques, based on the...

Expanded separation portfolios ( Se ) and Treasurer’s portfolios T( Se ) are a sect of themselves. They arise out of risk-free assets and risky portfolios like other mutual funds. But their distinctive features set them apart from the common lot. This paper puts forth, firstly, a down-to-earth...

This note develops the solutions of the static portfolio optimization problem in explicit matrix form. Three cases are contemplated and connected, with the derivation of relevant corner solutions: the unconstrained problem in the presence of risky assets only, the constrained one, and the...

There is now extensive empirical evidence showing that fund managers have relative performance objectives and adapt their investment strategy in the last part of the calendar year to their performance in the early part of the year. However, emphasis was put on returns in excess of some exogenous...

After taking into account biases induced by infrequent trading and selection, it is unlikely that illiquid asset classes have higher risk-adjusted returns than traditional liquid stock and bond markets. On the other hand, there are significant illiquidity premiums within asset classes. Portfolio...

We present comprehensive evidence in support of giving liquidity equal standing to size, value/growth, and momentum as investment styles, as defined by Sharpe (1992). First, we show that financial market liquidity, as identified by stock turnover, is an economically significant indicator of...

Most of the performance measures proposed in the financial and academic literature are subject to be gamed in an active management framework (Goetzmann et al., 2007). One of the main reasons of this drawback is due to an incomplete characterization by these measures of studied return...

Expanded separation portfolios ( Se ) and Treasurer's portfolios T( Se ) are a sect of themselves. They arise out of risk-free assets and risky portfolios like other mutual funds. But their distinctive features set them apart from the common lot. This paper puts forth, firstly, a down-to-earth...

This study investigates whether banks and insurance corporations perform regulatory arbitrage by buying bonds with inflated credit ratings. We argue that credit rating based capital requirements incentivize banks and insurance corporations to hold more bonds with inflated credit ratings. We...