EDHEC Business School

About: EDHEC Business School is a education organization based out in Roubaix, France. It is known for research contribution in the topics: Portfolio & Capital asset pricing model. The organization has 294 authors who have published 1749 publications receiving 42687 citations. The organization is also known as: Ecole des Hautes Etudes Commerciales du Nord & EDHEC Business School.

Time Consistent vs. Time Inconsistent Dynamic Asset Allocation: Some Utility Cost Calculations for Mean Variance Preferences

Abstract: We solve for the time consistent dynamic asset allocation of an investor with a mean variance objective function in a multiple assets affine setting. We use as a benchmark the pre-commitment strategy widely used in the literature and assess the potential welfare gains from pre-commitment by comparing the time consistent strategy to the pre-commitment, time inconsistent, strategy. The gains from pre-commitment are simply considerable since, in some cases, at the 5 years horizon the yearly certainty equivalent of the pre-commitment strategy is 48% compared with 9% for the time consistent strategy. However, these welfare gains result from huge and unrealistic positions in the risky assets; in some cases, the pre-commitment strategy is more than 60 times the time consistent strategy. We thus looked for alternative time inconsistent strategies that improve relative to the time consistent strategy while still involving reasonable risky asset positions. To identify these strategies, we explore an original aspect of the time consistent mean variance strategy: the presence of intertemporal hedging in such a strategy reflects welfare degradation. Therefore, a natural candidate is the time consistent strategy without the intertemporal hedging component. The second component of the time consistent strategy is the traditional myopic component discounted. We show that this component could be seen as a standard myopic strategy which is marked to market and the discount factor acts as a tailing factor. This marked to market myopic (MMM) strategy is shown to yield reasonable risky assets positions and substantial welfare gains at long horizons relative to the time consistent strategy. We also show that it dominates the standard myopic strategy as well as the equally weighted strategy.

Extreme Risk and Fractal Regularity in Finance

Abstract: As the Great Financial Crisis reminds us, extreme movements in the level and volatility of asset prices are key features of financial markets. These phenomena are difficult to quantify using traditional approaches that specify extreme risk as a singular rare event detached from ordinary dynamics. Multifractal analysis, whose use in finance has considerably expanded over the past fifteen years, reveals that price series observed at different time horizons exhibit several major forms of scale-invariance. Building on these regularities, researchers have developed a new class of multifractal processes that permit the extrapolation from high-frequency to low-frequency events and generate accurate forecasts of asset volatility. The new models provide a structured framework for studying the likely size and price impact of events that are more extreme than the ones historically observed. Fractal modeling uses invariance principles to parsimoniously specify complex objects at multiple scales. It has proven to be of major importance in mathemat- ics and the natural sciences, as this issue illustrates. Fractals also offer enormous benefits for the field of finance, in particular for modeling the price of traded se- curities, for computing the risk of financial portfolios, for managing the exposure of institutions, or for pricing derivative securities. These benefits should become more apparent as the adoption of fractal methods by the financial industry contin- ues to gain ground. The fields of finance and economics also play a singular role in the intellectual history of fractals. Benoˆ it Mandelbrot first discovered evidence of fractal behavior in financial returns, household income and household wealth in the late 1950's and early 1960's, and subsequently found similar patterns in coast- lines, earthquakes and other natural phenomena. These observations prompted the

A Survey of the Literature on Hedge Fund Performance

Abstract: The issue of performance measurement in the hedge fund industry has led to literature that is both abundant and controversial. The explanation for this complexity lies in the particular features of alternative funds. Hedge funds invest in a heterogeneous range of financial assets and cover a wide range of strategies that have different risk and return profiles. Even though the current studies on hedge fund performance appear to be confusing, due to conflicting conclusions and criticism of the methods employed in previous papers, they contribute to an improvement in the knowledge of alternative funds, and leading approaches are confirmed. The aim of this paper is to highlight some specific characteristics of hedge funds and their implications in terms of performance measurement. The most recent innovative contributions are reported.

Spillover Effects of Counter-Cyclical Market Regulation: Evidence from the 2008 Ban on Short Sales

Abstract: In this article the author looks at the impact of the ban on broad market indices in the U.S. and in Europe (the United Kingdom, France, and Germany). Since these indices and their performance are of great concern to the asset management and hedge fund industries, it is important for practitioners and policy makers to understand the impact of changing the rules of the game (banning short sales) on the return distribution of these indices and to assess the potential spillover effects of a counter-cyclical regulation affecting only one segment of the financial market. He examines the ban on a broad range of market and strategy risk factors and shows that while the ban may be responsible for a substantial increase in market volatility, its impact on higher moments of index returns is not systematic (skewness and kurtosis of the return distribution of only a few indices were affected) or robust (using some robust measures of higher moments makes the impact of the ban disappear).

Brand parody: a communication strategy to attack a competitor

Abstract: Purpose – The use of aggressive media campaigns to parody a competitor is a relatively recent development. The aim of this study is to gauge the consequences of parody on attitudes towards the brand that is the victim of the parody.Design/methodology/approach – The data collection was carried out in an experiment design in two steps (before and after brand parody exposure) in order to measure the effects of a parody exposition on brand‐parodied attitude.Findings – The results show that average level of attitude toward the brand parodied is significantly different after exposure to the advertisement that parodies it. Thus, the average level of attitude toward the brand parodied is significantly different in accordance with the degree to which those exposed to parodies are subject to feelings of anti‐commercial rebellion.Practical implications – This study shows that a brand parody communication by playing negative humour with an anti‐commercial style represents a real threat for the brand parodied.Original...