Showing papers by "EDHEC Business School published in 2003"

Hedge Fund Performance and Persistence in Bull and Bear Markets

Abstract: This paper tests the performance of 2894 hedge funds in a time period that encompasses unambiguously bullish and bearish trends whose pivot is commonly set at March 2000. Our database proves to be fairly trustable with respect to the most important biases in hedge funds studies, despite the high attrition rate of funds observed in the down market. We apply an original ten-factor composite performance model that achieves very high significance levels. The analysis of performance indicates that most hedge funds significantly out-performed the market during the whole test period, mostly thanks to the bullish sub-period. In contrast, no significant under-performance of individual hedge funds strategies is observed when markets headed south. The analysis of persistence yields very similar results, with most of the predictability being found among middle performers during the bullish period. However, the Market Neutral strategy represents a remarkable exception, as abnormal performance is sustained throughout and significant persistence can be found between the 20% and 69% best performers in this category, probably thanks to an extreme adaptability and a very active investment behavior.

Predictability in Hedge Fund Returns (corrected)

Abstract: A significant amount of research has been devoted to the predictability of traditional asset classes, but little is known about the predictability of returns emanating from alternative vehicles, such as hedge funds. We attempt to fill this gap by documenting evidence of predictability in hedge fund returns. Using multifactor models for the return on nine hedge fund indexes, for which the factors were chosen to measure the many dimensions of financial risk, we found strong evidence of significant predictability in hedge fund returns. We also found that the benefits of “tactical style allocation” portfolios are potentially large. We obtained even more spectacular results for an equity-oriented portfolio that mixed traditional and alternative investment vehicles and for a debt-oriented portfolio that mixed traditional and alternative investment vehicles. These results do not seem to have been significantly affected by the presence of reasonably high transaction costs.

Key Account Managers' Role Within the Value Creation Process of Collaborative Relationships

Abstract: Value creation and key account management both attract increasing attention among marketing researchers and practitioners. At the intersection of both research streams, however, little is known about the role that key account managers play for the creation of customer-perceived value. Do key account managers contribute to customer value and if so, what are the basic drivers? Based on a qualitative study among key account managers and a quantitative study among purchasing managers, this paper develops and tests a framework for value creation in key account settings. From a managerial point of view, the paper informs key account managers of activities that effectively improve the overall value proposition. From a theoretical perspective, the study deepens our understanding of value creation in collaborative relationships.

Benefits and risks of alternative investment strategies

Abstract: As a result of the complex trading strategies they implement, and the full flexibility they have with respect to their ability to use derivatives and trade in illiquid markets, hedge fund managers, even those following zero-beta non-directional strategies, are exposed to a variety of risk factors (volatility risk, liquidity risk, credit risk, etc) in a potentially complex manner. This paper argues that a proper understanding of hedge fund risk extends much beyond a straightforward measure of linear exposure to market risk, and provides a detailed analysis of how modern portfolio theory allows the presence of these rewarded sources of risk to be accounted for when assessing the performance of hedge fund managers. The contrasted exposures of hedge fund managers to a large number of risk factors poses serious challenges to the investor, as it requires the use of appropriate techniques dedicated to their measure and control. In contrast, it is argued that this is also the driving force behind the diversification benefits investors enjoy when investing in hedge funds. The main message can be summarised as follows: the benefits and risks or alternative investment strategies are two facets of the same coin.

An Analysis of Hedge Fund Performance

Abstract: Using one of the largest hedge fund databases ever used (2796 individual funds including 801 dissolved), we investigate hedge funds performance using various asset pricing models, including an extension of Carhart's (1997) specification combined with the Fama and French (1998) and Agarwal and Naik (2002) models and a new factor that takes into account the fact that some hedge funds invest in emerging bond markets. This addition is particularly suitable for more than half of the hedge funds categories, and for all funds in general. The performance of hedge funds for several individual strategies and different subperiods, including the Asian Crisis period, indicates limited evidence of persistence in performance but not for extreme performers.

The Culture-Performance Relationship in M&A: from Yes/No to How

Abstract: Do cultural differences have an impact on the performance of M&A? Despite the widely accepted myth that they do, and in a negative way, a review of extant research provides contradictory findings. In this article, we explore reasons for this contradiction and propose solutions in the form of propositions and a theoretical framework. We begin with a brief overview of extant research on the culture-performance relationship in M&A. In light of the contradictions emerging from this review, we move on to identifying three areas of complexity explaining this confusion, and for each one, we suggest propositions to guide future research. We then summarize our argument using a theoretical framework. Because of the long-term and dynamic nature of the M&A process, we argue that instead of studying the simple performance impact of cultural differences in M&A, we should move on to thinking how cultural differences impact on the M&A process and its outcome.

La mobilité du consommateur en magasin : une étude exploratoire de l'influence de l'aménagement spatial sur les stratégies d'appropriation des espaces de grande distribution

Abstract: Le modele d'influence de l'atmosphere (Kotler, 1973; Russel et Mehrabian, 1976), dominant dans la litterature en distribution, presente deux limites : il ne prend pas en compte le processus d'appropriation qui est fondamental dans l'experience de l'espace et il ne permet de rendre compte du role de l'amenagement spatial que de facon incomplete. L'objectif de cet article est d'etudier l'effet de l'amenagement spatial sur les strategies d'appropriation des consommateurs dans le cas de la grande distribution. Les resultats d'une etude menee dans deux grandes surfaces specialisees et un hypermarche montrent que deux types d'amenagements spatiaux (espace de divertissement actif et espace fonctionnel) favorisent le developpement de deux strategies d'appropriation (strategie ludique active et strategie fonctionnelle).

Stock Market Sensitivity to Interest Rates and Inflation

Abstract: Knowledge of the interest rate sensitivity of stocks is important in many areas of investment and finance. This paper makes three contributions to the existing literature: (a) it provides estimates of stock sensitivity to changes in nominal and real interest rates and expected inflation (b) it provides estimates of the degree of indexation of future growth expectations to changes in nominal and real interest rates and expected inflation and (c) examines whether government regulation, cyclicality of future cash flows and growth versus value characteristics of stocks can explain the differences in interest rate sensitivities across stocks.

Les modèles linéaires hiérarchiques : 1. principes et illustration

Abstract: Les recherches en management ont souvent comme caracteristique d’etudier des phenomenes qui impliquent des relations entre des variables mesurees a differents niveaux conceptuels : des industries, des entreprises, des domaines d’activite strategiques, des produits… ou encore des unites qui regroupent des equipes composees de groupes plus petits eux-memes faits d’individus. Ainsi, un aspect distinctif des processus organisationnels etudies en management est qu’ils prennent place a differents niveaux d’analyse (House, Rousseau et Thomas-Hunt, 1995).

Tactical Style Allocation—A New Form of Market Neutral Strategy

Abstract: Even though there is little evidence of predictability in stock specific risk, most equity market neutral managers still rely on stock picking as the preferred way to generate abnormal returns. In this article, the authors document the benefits of a new form of market-neutral portfolio strategy that aims at delivering absolute return over the full business cycle through systematic equity style timing decisions. Using a robust multi-factor recursive modeling approach, they find strong evidence of predictability in value and size style differentials. They use these econometric forecasts to generate systematic style timing allocation decisions. These portfolio decisions can be implemented using Exchange Traded Funds on US style indexes.

Vers un dépassement de l'antinomie entre rupture et continuité : le cas Valéo

Abstract: Resume Tour a tour effet d’un choc, choc lui-meme, manœuvre, strategie, les ruptures se sont aussi parfois vues qualifiees ex-post apres analyse longitudinale d’une entreprise consideree comme disruptive dans son secteur. De plus, l’effet des ruptures ajoute a la confusion liee a la notion : evolution, changement, destabilisation ou destruction ont pu etre successivement evoques. De la meme maniere, leur soudainete ou imprevisibilite ont pu connaitre plusieurs lectures.

Controle et comportements : une revue de la litterature anglo-saxonne

Abstract: Se placant dans le champ du controle organisationnel, ce papier presente une revue de la litterature anglo-saxonne qui etudie l'effet sur les comportements du controle par les resultats et du controle social. Une reflexion est menee sur les apports possibles des approches configurationnelles a ce domaine de recherche.

Apprentissages et confiance au sein d'une alliance technologique

Abstract: Resume Le role joue par la confiance dans l'apprentissage organisationnel a ete mis en exergue, tant par les chercheurs en management strategique que par les gestionnaires. Cependant, les etudes empiriques restent relativement rares, en particulier dans le domaine des alliances interentreprises. Cet article tente de combler partiellement ce vide grâce a une exploration d’une alliance technologique. L’analyse met l’accent sur les interactions entre confiance et apprentissages, tant au niveau inter-individuel que collectif. Nous cherchons a individualiser les influences respectives de la confiance sur l’apprentissage (et vice-versa) et a en illustrer les mecanismes de renforcement mutuels. L’analyse montre notamment que : – La confiance et les apprentissages collectifs se fondent sur la confiance et les apprentissages individuels ; – Les apprentissages individuels et collectifs revetent une dimension cognitive et une dimension comportementale, qui s’appuient respectivement sur une confiance de competence et de bonne volonte ;

Idiosyncratic Production Risk, Growth, and the Business Cycle

Abstract: We introduce a neoclassical growth economy with idiosyncratic production risk and incomplete markets. Each agent is an entrepreneur operating her own neoclassical technology with her own capital stock. The general equilibrium is characterized in closed form. Idiosyncratic production shocks introduce a risk premium on private equity and reduce the demand for investment. The steady state is characterized by a lower capital stock due to entrepreneurial risk and a lower interest rate due to precautionary savings as compared to complete markets. The private equity premium is endogenously countercyclical: the anticipation of low savings and high interest rates in the future feed back to high risk premia and low investment in the present. Countercyclicality in risk taking slows down convergence to the steady state and amplifies the magnitude and persistence of the business cycle. These results, which contrast sharply with those obtained in Bewley models, highlight the macroeconomic significance of missing markets in production and investment risk.

Style Rotation Strategies: Issues of Implementation

Abstract: Effective implementation of market timing and style rotation strategies poses challenging questions to an active fund manager. In addition to the problems associated in devising a truly viable forecasting model, style rotation has direct implications on portfolio risk constraints and transaction costs; furthermore, implementation depends on institutional constraints and the in-house investment philosophy. Using a variety of implementation rules that explicitly control for risk, we find that style rotation strategies are profitable for investors with different benchmarks and various risk constraints. More specifically, style rotation is as feasible for hedge fund managers who target absolute returns as it is for traditional fund managers who face tight risk constraints. The break-even transaction costs required before the style rotation strategies become unprofitable, are reasonable especially for fund managers who invest in medium sized companies.

Profitable Innovation Without Patent Protection: The Case of Derivatives

Abstract: Investment banks develop their own innovative derivatives to underwrite corporate issues but they cannot preclude other banks from imitating them. However, during the process of underwriting an innovator can learn more than its imitators about the potential clients. Moving first puts him ahead in the learning process. Thus, he develops an information advantage and he can capture rents in equilibrium despite being imitated. In this context, innovation can arise without patent protection. Consistently with this hypothesis, case studies of recent innovations in derivatives reveal that innovators keep private some details of their deals to preserve the asymmetry of information.

CTA Performance, Survivorship Bias and Dissolution Frequencies

Abstract: Using one of the biggest database ever used in commodity trading advisors (CTA) academic study containing 1892 funds (including 1350 dissolved funds), we investigate CTA performance and persistence in performance in order to determine if some CTA consistently and significantly outperform their peers over various time periods. In order to test the persistence hypothesis, we use a methodology based on Carhart's (1997) decile classification. We also empirically decompose decile's performance across the CTA strategies covered in order to determine if some deciles are more exposed to certain strategies over time. We also analyze the presence of survivorship bias and its evolution over time. We conclude the study in analyzing the dissolution frequencies across deciles and its evolution over time. Keywords: commodity trading advisors, CTA, managed futures, futures, hedge fund, alternative investments, persistence, performance, Carhart, Capocci, Barclay Trading Group, survivorship bias, dissolution frequencies, dissolution, index

Les modèles linéaires hiérarchiques : 2. une méthode privilégiée d'analyse des données collectées par policy capturing

Abstract: M@n@gement is a double-blind reviewed journal where articles are published in their original language as soon as they have been accepted. Copies of this article can be made free of charge and without securing permission, for purposes of teaching, research, or library reserve. Consent to other kinds of copying, such as that for creating new works, or for resale, must be obtained from both the journal editor(s) and the author(s).

The Role of Risk Aversion and Intertemporal Substitution in Dynamic Consumption-Portfolio Choice with Recursive Utility

Abstract: The objective of this note is to understand the implications for consumption and portfolio choice of the separation of an investor's risk aversion and elasticity of intertemporal substitution that is made possible by recursive utility, in contrast to expected utility where the two are dictated by the same parameter. In particular, we study whether the optimal consumption and portfolio decisions depend on risk aversion, elasticity of intertemporal substitution, or both. We find that, in general, the consumption and portfolio decisions depend on both risk aversion and the elasticity of intertemporal substitution. Only in the case where the investment opportunity set is constant, is the optimal portfolio weight independent of the elasticity of intertemporal substitution, though even in this case the consumption decision depends on both risk aversion and elasticity of intertemporal substitution.

Gestion des ressources humaines et performance économique : une étude du bilan social

Abstract: Cette recherche examine l’impact de pratiques de gestion des ressources humaines (le climat social, les politiques de remuneration et de formation et les conditions de travail, la structure de l’emploi) sur la performance de l’entreprise. Les resultats sont fondes sur un echantillon national de cinquante-huit entreprises. Le modele structurel demontre un pouvoir predictif des depenses de formation et des conditions de travail.

Time to Efficiency of the French CAC 40 Index Options Market

Abstract: Classical tests of arbitrage relationships on option markets usually follow an ex post methodology, checking whether immediate construction of arbitrage portfolios lead to positive flows. Therefore, they are no true tests of efficiency since identified deviations may not persist for a sufficient time for arbitrageurs to exploit them. In this paper, we use intradaily data and adopt an ex ante approach, replicating as closely as possible execution conditions available to traders on the CAC 40 option index contract between August 2000 and July 2001. Taking the ex post distortions to put-call parity as signals for the construction of ex ante arbitrage portfolios, we first compute the effective arbitrage profits accessible after fixed execution delays. These profits appear to be decreasing with the length of the delay. We further investigate the informational efficiency through the development of an original indicator we call “time to efficiency”, which is simply the time necessary for the market to meet prices compatible with no arbitrage once an ex post deviation has been identified. These dynamical approaches allows us to evidence the positive influence of ETFs on efficiency since the persistence time of deviation have been cut by half following their introduction on the French market.

Innovation, Differentiation, and the Choice of an Underwriter: Evidence from Equity Linked Securities

Abstract: Investment banks imitate other bank's innovative corporate securities with their own varieties, and compete with the innovator to underwrite new issues. This paper uses data of all the corporate offerings of Equity-Linked and Derivative Securities from the SDC records to estimate the issuer's demand of underwriting services provided by investment banks across different varieties of securities. The results show that, ceteris paribus, the demand for the innovator's variety is larger than for the imitators'. The estimated demand advantage is decreasing in time, and it decreases faster if the security appeared later in a sequence of innovations.

Cas d'analyse des données en marketing

Abstract: Analyse des donnees, statistiques, le marketing fait appel a des connaissances mathematiques complexes. Permettant de les apprehender, cet ouvrage est un outil unique par sa demarche pedagogique. Au-dela des rappels theoriques qu'il propose, il offre des cas reels varies et resolus qui illustrent la diversite des domaines rencontres et des techniques utilisees en marketing. Il privilegie et facilite le passage vers l'application, essentiel pour cette discipline qui s'appuie largement sur l'action et le terrain.

General Equilibrium Real and Nominal Interest Rates

Abstract: We derive the general equilibrium short-term real and nominal interest rates in a monetary economy affected by technological and monetary shocks and where the price level dynamics is endogenous. Assuming fairly general processes for technology and money supply, we show that an inherent feature of our equilibrium is that any real variable dynamics, in particular that of the short-term real interest rate, is driven by both monetary and real factors. This money non-neutrality is generic, as it does not stem from any friction such as price stickiness, or from a particular utility function. Nonneutrality obtains because the ex ante cost of real money holdings is random due to inflation uncertainty. We then analyze in depth a specialized version of this economy in which the state variables follow square root processes, and the representative investor has a log separable utility function. The short-term nominal rate dynamics we obtain encompasses most of the dynamics present in the literature, from Vasicek and CIR to recent quadratic and, more generally, non-linear interest rate models. Moreover, our results pave the way to several new nominal term structures.

How Much Does it Cost to Short Sale a Stock Index

Abstract: Options prices have been used extensively to assess the cost of short selling. The price of the underlying of the options implicit in the options prices is obtained using the Call-Put Parity and compared to the underlying price prevailing in the market. The disparities between the two prices are attributed to short sale constraints. This approach overlooks the fact that in the same way that options could be used to short sale the underlying, they could also be used to buy it. Therefore, Call-Put Parity disparities are related to both possibilities and thus standard measure of short sale costs implicit in options prices underestimated this cost. We suggest a new decomposition of the Call Put Parity disparities that we implement in the case of European options on a dividend protected stock index in a market without market makers. We estimate the cost of buying the underlying and the cost of short selling it through the option markets, the difference between the two costs being the incremental cost of short selling.

Risques de solvabilité, de liquidité et de taux au sein du secteur bancaire : coût historique et juste valeur

Abstract: Au sein du secteur bancaire, selon les methodes d'evaluation comptables retenues (cout historique ou juste valeur), il sera plus ou moins aise de detecter rapidement les eventuelles difficultes que certains etablissements bancaires pourraient rencontrer du fait d'une mauvaise apprehension des risques de solvabilite, de liquidite et de taux.