Jack L. Treynor Volume 9, Number 4, Fourth Quarter 2011 Markowitz’ 1959 book introduced a concept of value that could actually be tested. Markowitz’s quite general conditions can lead to the Central Limit Theorem. Consider weekly returns on Markowitz’s random wheel. Then annual returns on actual prices would have 52 terms reflecting returns on value… Read more
Insight
INSIGHTS: What Interest Rate Models To Use? Buy Side Versus Sell Side
Sanjay K. Nawalkha and Riccardo Rebonato Volume 9, Number 3, Third Quarter 2011 Does the selection of a specific interest rate model to use for pricing, hedging, and risk return analysis depend upon whether the user is a buy-side institution or a sell-side dealer bank? Sanjay Nawalkha and Riccardo Rebonato debate this question in this… Read more
INSIGHTS: A New Taxonomy of the Dynamic Term Structure Models
Sanjay K. Nawalkha, Natalia A. Beliaeve and Gloria Soto Volume 8, Number 4, Fourth Quarter 2010 This paper gives a new taxonomy of dynamic termstructure models (TSMs) that classifies all existing TSMs as either fundamental models or preference-free single-plus, double-plus, and triple-plus models.We exemplify the new taxonomy by considering preference-free versions of some well-known fundamental… Read more
INSIGHTS: Some Lessons Learned in 42 Years of Business
Charles E. Harris Volume 8, Number 3, Third Quarter 2010 From 1984 to 2008, I had the pleasure and privilege of serving as Chairman and CEO of Harris & Harris Group, LLC, a publicly traded venture capital firm based in New York. Upon my retirement, I decided to summarize lessons I learned in my 42… Read more
INSIGHTS: The Inevitable Baggage We Display
Dean LeBaron Until the point at which investment models began melting, too many investment practitioners operated within a myopic belief system that failed to contemplate certain fundamentals that are rigorously observed in other scientific disciplines. Flaws crept into our research under various headings of convenient simplification, behavioral finance, and statistical tools. Biases influenced our work… Read more
INSIGHTS: Lessons on Investment Management From the Global Recession and Bear Market
Frank J. Jones Volume 8, Number 1, First Quarter 2010 The current global recession and financial crisis have significantly affected virtually all investment managers. The severity of the effects on investment management risk has induced many investment managers to reconsider their investment approaches in terms of investment management risk. This paper summarizes and evaluates many… Read more
INSIGHTS: The 7 Habits of Highly Suspicious Hedge Funds
Richard Bookstaber Volume 7, Number 4, Fourth Quarter 2009… Read more
INSIGHTS: Market Crises Can the Physics of Phase Transitions and Symmetry Breaking Tell Us Anything Useful?
Vineer Bhansali Volume 7, Number 3, Third Quarter 2009 This paper addresses aspects of the current financial market crisis by drawing analogies from the physics of phase transitions. If such an analogy is indeed appropriate, then the evolving dynamics of financial markets might have characteristics that the traditional models of finance will not be able… Read more
INSIGHTS: Stockholder Rights and Carl Icahn
Harold Bierman, Jr. Volume 7, Number 1, First Quarter 2009 One might conject that shareholder activism should be praised and welcomed by shareholders. This paper suggests that actions, alleged to be on behalf of shareholders, can be shown to be on behalf of a small group of activist investors, and not for the broader group… Read more
INSIGHTS: Risk and Return in Behavioral SDF-Based Asset Pricing Models
Hersh Shefrin Volume 6, Number 4, Fourth Quarter 2008 Behavioral finance has profound implications for the pricing of all assets, from standard fixed income securities and equity to complex derivatives. This paper describes a general, unified framework for analyzing the impact of sentiment on asset prices. The approach brings together the psychological assumptions favored by… Read more