A text book treatment of calculating returns on non-traditional portfolios

This paper addresses a gap in traditional portfolio literature by providing techniques for identifying returns on non-traditional portfolios.Futures contracts require daily cash flows over the holding period; these cash flows determine the rate of return. The security deposit represents a tied investment since the funds are not available for other uses and do not earn a risk adjusted return. To initiate a short option or a short stock position also requires a cash outflow. The cash outflow or equity deposit effectively constitutes an investment since the trader postpones consumption in a risky medium that does not guarantee the return of the funds.By identifying the amount of the investment and rates of returns, it is possible to extend normative investment analysis to non-traditional portfolio holdings. This paper introduces four propositions to aid in this process.     

专利竞争优势的理论探源

目前，专利问题不再仅仅是留给律师和工程师们的技术性工作，更应成为高层经理们制定战略时考虑的关键内容，但专利战略管理的理论研究还不够深入。本文认为垄断与创新，这个专利系统不得不面临的悖论难题却使专利竞争优势具有多种租金性质和存在一定的时空范围，也造就了专利竞争的立体性、多维性和复杂性。这不仅突出了开展专利战略管理研究的必要性和重要性。也为专利的差异化战略设计提供巨大空间和丰富的理论源泉。     

Herding behavior in the Pakistan stock exchange: Some new insights

This study attempts to examine the presence of herding behavior in the Pakistan Stock Exchange (PSX). The novel contribution of this paper is that it investigates the herding phenomenon from a large number of facets such as herding of firms towards market, herding of firms towards industry portfolios, herding of industry portfolios towards market, herding in mostly traded stocks and in large and small stocks, and herding in the crisis period. For this purpose, we use the herding behavior model of Christie and Huang (1995) on the daily closing prices data of 609 firms listed on the PSX from January 2004 to December 2013. Results show that individual firms do not herd towards market index, except when the market experiences a negative return of 5%. However, when we sort firms into small and large groups based on median market capitalization, results indicate that large firms show herding behavior in extreme market movements. Further, we find that firms in several industries herd towards their industry portfolios. However, we find weak evidence of industry portfolios herding towards the market. We also segregate the impact of financial crisis of 2008 from normal times. These findings support results of our baseline estimation.     

Illiquidity Premium in the MILA

This article analyzes the illiquidity premium in the MILA. Using seven proxies for illiquidity, we find a positive and significant illiquidity premium for our sample. A microstructure bias-free portfolio weighting based on past returns is critical in our finding of an illiquidity premium, which is robust to several methodological changes in our portfolio simulations. We also document that the premium is present only in small and high book-to-market stocks. Nonetheless, when we control for size and distress effects, the difference and significance in risk-adjusted returns between portfolios of high and low illiquidity stocks remains.     

MARKOWITZ'S PORTFOLIO OPTIMIZATION IN AN INCOMPLETE MARKET

In this paper, for a process S , we establish a duality relation between K_p , the     - closure of the space of claims in     , which are attainable by "simple" strategies, and     , all signed martingale measures     with     , where   p ≥ 1, q ≥ 1  and     . If there exists a     with     a.s., then K_p consists precisely of the random variables     such that ϑ is predictable S -integrable and     for all     . The duality relation corresponding to the case   p = q = 2  is used to investigate the Markowitz's problem of mean–variance portfolio optimization in an incomplete market of semimartingale model via martingale/convex duality method. The duality relationship between the mean–variance efficient portfolios and the variance-optimal signed martingale measure (VSMM) is established. It turns out that the so-called market price of risk is just the standard deviation of the VSMM. An illustrative example of application to a geometric Lévy processes model is also given.     

Equally Weighted Strategic Allocation and Balanced Funds in Brazil

This article analyzes equally weighted strategic asset allocation portfolios in Brazil between 2004 and 2016 and shows that their average returns are not always statistically greater than those of balanced funds, with significance changing in sub-periods. Fixed-income portfolios frequently outperform balanced funds, whose active management underperforms their declared benchmark portfolios. Balanced funds underperformed probably because they deviated from their investment policy. Transaction costs and other rebalancing frequencies do not change the conclusions. Robustness tests indicate that this evidence is valid out-of-the-sample. Investors can mimic balanced-fund policy and possibly do better by means of indexing according to this policy.     

Cover's universal portfolio,stochastic portfolio theory,and the numéraire portfolio

Cover's celebrated theorem states that the long‐run yield of a properly chosen “universal” portfolio is almost as good as that of the best retrospectively chosen constant rebalanced portfolio. The “universality” refers to the fact that this result is model‐free, that is, not dependent on an underlying stochastic process. We extend Cover's theorem to the setting of stochastic portfolio theory: the market portfolio is taken as the numéraire, and the rebalancing rule need not be constant anymore but may depend on the current state of the stock market. By fixing a stochastic model of the stock market this model‐free result is complemented by a comparison with the numéraire portfolio. Roughly speaking, under appropriate assumptions the asymptotic growth rate coincides for the three approaches mentioned in the title of this paper. We present results in both discrete and continuous time.     

Optimal portfolios and Heston's stochastic volatility model: an explicit solution for power utility

Given an investor maximizing utility from terminal wealth with respect to a power utility function, we present a verification result for portfolio problems with stochastic volatility. Applying this result, we solve the portfolio problem for Heston's stochastic volatility model. We find that only under a specific condition on the model parameters does the problem possess a unique solution leading to a partial equilibrium. Finally, it is demonstrated that the results critically hinge upon the specification of the market price of risk. We conclude that, in applications, one has to be very careful when exogenously specifying the form of the market price of risk.     

Optimal portfolios with a positive lower bound on final wealth

We consider the determination of optimal portfolios under a lower bound on the final wealth. Possible applications range from capital guarantee strategies over life insurance investment where part of the benefit is a guaranteed return on capital to continuous-time mean-variance problems with a strictly positive lower bound. Our solution method consists of transforming the original problem into a portfolio problem without a positive lower bound but a transformed utility function and a modified initial wealth.     

Customer and Supplier Portfolios: Can Credit Risks be Managed Through Supply Chain Relationships?

While supply chain risk has been the subject of an ever‐increasing amount of research attention, the importance of credit risk has been less studied, at least by supply chain researchers. Yet, there may be risks inherent within a firm's portfolios of supply chain relationships that are manifested in the credit risk of a firm. Moreover, portfolio characteristics may serve as a signal to the external market regarding these risks. While customer and supplier portfolio characteristics may impact the firm's exposure to risks, the specific issue of how portfolio characteristics relate to credit risk has rarely been examined by supply chain scholars. This research bridges extant works in supply chain management and finance to relate supply chain characteristics to a critical reputational outcome, namely credit ratings. In this research, we utilize a sample of firms that recently underwent an initial public offering to empirically examine the theoretical predictions of Resource Dependence Theory regarding the relationships between different supply chain portfolio characteristics and credit risk.