This study investigates the optimal asset allocation of a financial institution subject to liquidity risks and whose customers are free to withdraw their capital-guaranteed financial contracts at any time. Accounting for constraints on the solvency of the institution, we present a general...

We use unique institutional securities holdings data to examine the trading behaviour of delegated institutional capital and its impact on bond risk premia. We show that institutional fund managers trade strongly procyclically: they actively move into higher yielding, longer duration and lower...

This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model, for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete. Investment opportunities are driven by, and partially...

Our objective in this paper is to examine whether one can use option-implied information to improve the selection of mean-variance portfolios with a large number of stocks, and to document which aspects of option-implied information are most useful for improving their out-of-sample performance....

This paper provides a comprehensive examination of whether portfolios formed on capital asset pricing model anomalies capture information related to changes in the investment opportunity set and therefore may appropriate candidates as state variables within Merton's (1973) ICAPM framework....

This paper studies the quantitative properties of a general equilibrium model where a continuum of heterogeneous entrepreneurs are subject to aggregate as well as idiosyncratic risks in the presence of a borrowing constraint. The calibrated model matches the highly skewed wealth and income...

Abating dominance of the US Dollars (US$) as an asset class notwithstanding, the truly structural question is whether it ought to remain the universal numeraire by which sizes and risk-return performances of international reserves and sovereign wealth funds (henceforth sovereign portfolios) are...

This paper challenges H. Markowitz's Portfolio Theory due to its narrow focus upon market risk. It identifies 6 risks and presents a long only active investment process whose principles are supported by five year beta trials 2003-2009 & the performance of current portfolios. The DigitalInvest...

The authors revisit the case for maintaining a strategic overweight to corporate bonds in fixed income portfolios based on the notion of the credit risk premium. Using a series of excess returns to investment-grade corporate bonds going back to 1926, the authors find evidence of a positive risk...

Inflation risk is greatest in times of national or global stress; inflation risk is a form of a “tail risk.” A traditional portfolio of stocks and bonds is exposed to inflation risk. The specific nature of an investor's liabilities and spending determines inflation sensitivity beyond that of...