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Abstract:
Several studies have examined whether a manager having an MBA or CFA leads to superior portfolio performance. However, these studies have yielded mixed conclusions. A possible reason is that most have considered only MBA or CFA alone, and most have not controlled for managers’ style targets. We examine MBAs and CFAs together, controlling for market conditions and style targets. We find no unambiguous difference in return attributable to MBA, CFA or Experience; but more significantly (especially in light of recent events), CFAs reduce and MBAs increase portfolio risk.

CFA, MBA, portfolio managment, portfolio risk

Abstract:
In the money management industry, there is a "quiet" controversy over who does a better job, Traditional Managers (Fundamentalists), or Quantitative Managers. This issue has been examined by Gruber (1996), and Pastor and Stambaugh (2003) and more recently by Zhao (2006) and Wermers, Yao and Zhao (2007) using mutual fund portfolios. We reexamine this issue using the Plan Sponsor Network Database (PSN), a survivorship free database, which reports on how managers actually manage investment portfolios with respect to both style and types of stock selection methods used. Our empirical results indicate that when examining performance purely attributable to the use of a distinct Primary Investment Process, only the Fundamental approach is shown to significantly add value. However, when examining marginal performance of a Secondary Process, over and above a Primary approach, no process adds value, and in fact some detract.

Mutual Funds, Quantitative, Fundamental

Abstract:
We develop a valuation formula for analyzing high growth firms using the stages of an industry lifecycle. Our model is best suited for start-up firms with low (or negative) earnings and low sales. Our formula uses start-up firm data and captures the firm's growth potential by incorporating data about two key stages along the lifecycle. One stage corresponds to the largest firm in the industry and the other to the firm situated at the inflection point of the S-shaped curve describing the lifecycle. We test the formula by examining the biotechnology industry in the late 1990s. An empirical analysis of the biotechnology industry reveals an important correlation between market values growth rates and assets growth rates, which is predicted by our formula. We find that on average, our formula underestimates the actual market value of biotechnology start-up firms by about 15%.

Valuation, High Tech Stocks, Industry Lifecycle

Abstract:
We present hedge fund performance estimates that adjust for stale prices, Fama-French risk factors and Skewness. We contrast these new performance estimates with traditional performance measures. Using three-factor models to adjust for staleness in prices and to incorporate Fama-French factors along with the Harvey-Siddique (2000) two-factor model that incorporates Skewness, we find that for the period 1990-2003, all hedge fund categories achieve above average performance when measured against an aggregate market index. More significantly, however, when we estimate performance at the individual hedge fund level, we discover that only 40 to 47% of the funds are shown to achieve an above average performance over that time period depending on the model used. These results have important implications for investors, endowments and pensions when they choose hedge fund managers.

Hedge funds, Skewness, Coskewness, Performance

Abstract:
We examine whether the increase in the flow of capital to hedge funds over the period 1994-2005 had a negative impact on performance. More specifically, we study the relative performance of small versus large funds for each of the hedge fund strategies. Our results indicate that on an absolute return basis, small funds outperform large funds. On a risk-adjusted return basis, however, we find that large funds outperform small funds, and that large funds are also shown to hold less liquid assets and take on less systematic and idiosyncratic risk than small funds. Further, funds that experience positive liquidity shocks generally outperform those that experience negative liquidity shocks. We also find evidence that hedge fund managers that are aggressive in dealing with liquidity shocks perform better than hedge fund managers that are conservative in dealing with liquidity shocks.

Hedge funds, Liquidity, Size, Strategy, Performance

Abstract:
In this paper we highlight the salient features of Covered Bonds in relation to MBS, and argue for their introduction to the US market accompanied with the appropriate legislative structure and oversight. The Covered Bond market has the potential of adding significant measure of stability to the banking system while becoming an important source of long-term funding for residential and commercial mortgage loans in the United States.

Abstract:
We present hedge fund performance estimates that adjust for stale prices, Fama-French risk factors and skewness. We contrast these new performance estimates with traditional performance measures. Using three-factor models to adjust for staleness in prices and to incorporate Fama-French factors along with the Harvey-Siddique (2000) two-factor model that incorporates skewness, we find that for the period 1990-2003, all hedge fund categories achieve above average performance when measured against an aggregate market index. More significantly, however, when we estimate performance at the individual hedge fund level, we discover that only 40 to 47% of the funds are shown to achieve an above average performance over that time period depending on the model used. These results have important implications for investors, endowments and pensions when they choose hedge fund managers.

Abstract:
We investigate the differences in the holdings of institutional investors relative to individual investors during an eight-month period between March and November 2000, where the Nasdaq Composite index fell 46.23% in value. We find evidence that during that market decline, institutional investors held stocks with less return volatility than individual investors. Our evidence of institutional investor preference for holding lower volatility stocks in a declining market may indicate their relatively greater sensitivity to downside risk. As a consequence, institutional investors are found to perform better than individual investors during that specific time period.

Abstract:
Among the decisions most mutual fund portfolio managers make is the number of stocks to hold. We posit that there is an optimal number of stocks for each mutual fund, reflecting the trade-off between diversification benefits versus transactions and monitoring costs. We find a significant quadratic relation between number of stock holdings and risk-adjusted returns for U.S. equity mutual fund portfolios during 1992-2000. Moreover, we find that changes in the number of stocks held over time are more highly correlated with mutual fund flows than with funds' investment returns.

Mutual funds, portfolio selection, risk-adjusted returns

Abstract:
This study examines the behavior of the forward market for foreign exchange for the British pound and the Japanese yen during the turbulent Gulf War period of 1990. The bivariate Engle-Granger technique in conjunction with a time-related dummy variable is used. The study supports market efficiency for both exchange rates, only after five weeks around the invasion week are excluded. Finally, an endogeneously determined structural break is found around the invasion week of the War.

Abstract:
This paper develops a general equilibrium asset-pricing model that incorporates both production technology and consumption-smoothing behavior. It shows that technology and productivity shocks, labor input and capital stock are important factors in explaining the behavior of expected asset returns. Empirical tests indicate that, while technology shocks and growth in capital stock are significant factors in explaining asset returns, it is the labor growth variable that appears to provide most of the explanatory power. Furthermore, our results indicate that investors are likely to have high levels of relative risk aversion as well as consumption-smoothing behavior.