Suppose a fund manager uses predictors in changing portfolio allocations over time. How does predictability translate into portfolio decisions? To answer this question we derive a new model within the Bayesian framework, where managers are assumed to modulate the systematic risk in part by...

Using a Bayesian time‐varying beta model, we explore how the systematic risk exposures of hedge funds vary over time conditional on some exogenous variables that managers are assumed to use in changing their trading strategies. In such a setting, we impose a structure on fund returns, betas...

We study the time-varying dependence of sovereign credit default swap (CDS) spreads on real-time, country-specific macro indicators during the eurozone sovereign debt crisis. Macro fundamentals explain 66% of the time-series variance of CDS spreads, but the time variation in macro sensitivities...

Using data from Italy, this study investigates whether tax effects can account for differences in return patterns between domestic and foreign mutual funds, and if this dissimilarity translates into performance. The paper presents evidence, based on a unique dataset of 4,178 open-ended mutual...

Suppose a fund manager uses predictors in changing portfolio allocations over time. How does predictability translate into portfolio decisions? To answer this question we derive a new model within the Bayesian framework, where managers are assumed to modulate the systematic risk in part by...

This study investigates whether domestic managers and their foreign counterparts differ in terms of return patterns over time, and where such difference originates. Reasons of financial sophistication of mutual fund markets lead to the assumption that money managers may behave differently from...

In this paper we develop a flexible and analytically tractable framework to compute the Credit Expected Shortfall in an explit if form through Kumaraswamy (1980) distribution with both default rate and recovery rate time-varying. The default rate is assumed to follow a square root process, and...

In this study, we explore the risk parity and equal risk contribution (ERC) investment strategies and propose an interpretation of their return dynamics conditioning on the states of the market. We also evaluate risk parity against other risk-only and risk-return approaches. Finally, we combine...

Using a Bayesian time-varying beta model we explore how the systematic risk exposures of hedge funds vary over time conditional on some exogenous variables that managers are assumed to use in changing their trading strategies. In such a setting, we impose a structure on fund returns, betas and...

We model the learning process of market traders during the unprecedented COVID-19 event. We introduce a behavioral heterogeneous agents' model with bounded rationality by including a correction mechanism through representativeness (Gennaioli et al., 2015). To inspect the market crash induced by...