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.

Tail Risk in the Cross Section of Alternative Risk Premium Strategies

Abstract: In this article the authors attempt to get a better understanding of the cross-section of alternative risk premia using a multi-asset version of the downside risk CAPM. In line with the empirical literature, they find that the cross-section of realized returns is much better explained when using the downside risk CAPM, rather than relying on the traditional CAPM. However, in contrast to the empirical literature, the authors cannot always recover the required signs in their cross-sectional regressions. In particular, we find that taking on downside risk is not always systematically rewarded. This might either be due to the limited availability of time series that essentially overweight the exceptional events of 2008 or a direct result of creating back-tests with attractive in-sample features that are impossible to be repeated out-of-sample.

What’s Wrong with Today’s Economics? The Current Crisis Calls for an Approach to Economics Rooted More on Data Than on Rationality

Abstract: Focardi and Fabozzi argue that current mainstream economics is not a science in the sense of the physical sciences, and they draw some conclusions from the point of view of asset management. Their key point is that economics as embodied in the general equilibrium theories describes an idealized rational economic world as opposed to one based on empirical data. Although this argument has already been made, it has been virtually ignored by economists. The current crisis, however, requires an economic understanding anchored on a solid empirical basis. The authors review a number of facts, including the following: 1) market efficiency is a quantitative concept, with efficiency defined in terms of the magnitude of realistic profit opportunities; 2) the dynamic vector-like nature of inflation challenges current theories about inflation and the generation of money, making growth path-dependent; 3) economic conservation laws are key to understanding growth; and 4) a market economy cannot support an unbounded level of wealth and income inequality because they become a destabilizing factor. The overall lesson for asset management is that economics matters and that the culture of pure speculation would be replaced profitably for society as a whole with a true culture of investment.

Serious Games: A Seminar Map for International Business Schools

Abstract: One business school addressed the “zeitgeist” of the financial crisis by introducing in its inaugural seminar the cultural and ethical values too often absent from the types of transactions students are trained to manage. Drawing from cross-cultural and communication studies, the author tested “serious games”—cultural situations and personal development exercises aimed at rewarding rule-based cooperation, interpersonal communication, and cultural empathy. Observations made during the games fostered curriculum reform by integrating humanistic concerns considered vital for international finance careers. Linking such training to business learning objectives enhances accountability, rule-based action, and cultural awareness reform.

Modeling nonlinear and heterogeneous dynamic links in international monetary markets

Abstract: We use daily short-term interbank interest rates of France, the United Kingdom, and the United States to examine the dynamic links of international monetary markets from 2004 to 2009. Results from vector error-correction models and smooth-transition error-correction models show strong evidence of nonlinear and heterogeneous causalities between the three interest rates. We also find that changes in the U.S. interest rate deviations from the long-run equilibrium led those in France and in the United Kingdom by one to two days. Finally, the national interest rate nexus appears to converge in nonlinear fashion toward a steady state because it is subject to structural change beyond a certain rate threshold. Our findings have important implications for the actions of leading central banks (ECB, Bank of England, and U.S. Fed) because the joint behavior of short-term interest rates can be viewed as an indicator of the degree of central banks' policy interdependence.