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.

Calibrating credit risk dynamics in private infrastructure debt

Abstract: Recent research has demonstrated that structural credit risk models are capable of explaining the credit risk process for private, illiquid debt. This article extends this literature by proposing a simple and intuitive calibration approach using Bayesian inference to capture the nonlinear dynamics of debt service cover ratios using a new dataset of private cash flows collected by hand for 267 European infrastructure projects spanning 17 years. The combination of a cash flow–driven structural model with observable cash flow data and Bayesian inference enables the measurement of default risk even when few or no defaults have been or can be observed, whereas reduced-form models like the ones used by rating agencies necessarily lead to biased credit risk estimates for private debt.

Stock Return Predictability in a Monetary Economy

Abstract: In an economy where agents hold money, the short interest rate determines the trade-off between money holdings and consumption. Building on this idea, we develop a theoretical model that shows the transmission mechanism through which the short rate finds its way to stock-return predictability regressions. We construct a cointegration relation that links share prices and dividends to the short interest rate when we investigate empirically the main implications of our model. This relationship, that we denote the pdR-ratio, strongly predict stock returns and excess returns, even when the statistical significance of long-horizon return predictability is evaluated using Hodrick (1992) t-statistics. The result that stock returns and excess returns are predictable at long horizons is different from recent findings reported by Ang & Bekaert (2006). We differ from Ang & Bekaert (2006) by explicitly accounting for the non-stationarity of the predictors in a cointegration framework. Our theoretical model also suggests that aggregate output might be better suited as a scaling variable than dividends. As a consequence, we also build a cointegration variable that relates share prices, output, and the interest rate in a cointegration framework. We denote this variable the pyR-ratio. We show that the pyR-ratio strongly predicts stock returns and excess returns at long horizons. The pyR-ratio is also found to have some predictive power for dividend growth which the pdR-ratio does not. Neither the pyR-ratio nor the pdR-ratio have predictive power for output growth and the interest rate.

Quanto Option Pricing with Lévy Models

Abstract: We develop a multivariate Levy model and apply the bivariate model for the pricing of quanto options that captures three characteristics observed in real-world markets for stock prices and currencies: jumps, heavy tails and skewness. The model is developed by using a bottom-up approach from a subordinator. We do so by replacing the time of a Brownian motion with a Levy process, exponential tilting subordinator. We refer to this model as a multivariate exponential tilting process. We then compare using a time series of daily log-returns and market prices of European-style quanto options the relative performance of the exponential tilting process to that of the Black–Scholes and the normal tempered stable process. We find that, due to more flexibility on capturing the information of tails and skewness, the proposed modeling process is superior to the other two processes for fitting market distribution and pricing quanto options.

Transaction Costs, Trading Volume and Momentum Strategies

Abstract: This study considers the relationship between trading volumes, transactions costs, and the profitability of momentum strategies using data from the UK. We demonstrate that round-trip transactions costs for selling loser firms are around double those of buying winners, and in particular, the costs of selling low volume losers is more than twice as high as the cost of selling low volume winners. By contrast, there are only modest differences between the costs of buying winners and losers, irrespective of their volume levels. Yet we observe that, even in net terms, momentum strategies based on low volume stocks are more profitable than those using high volume stocks. We also note important differences between transactions costs measured using quoted versus effective spreads. Altogether, our findings should sound a word of caution for any study attempting to evaluate the impact of transactions costs on momentum profitability that such costs are very heterogeneous across firms and trade types, implying that they require careful calculation.

Le rôle des technologies de l'information et de la communication dans le développement de la qualité de la « relation client » : Application à la relation banque/entreprise

Abstract: L’atteinte d’un avantage competitif dans les services bancaires passe par l’amelioration de la qualite de la relation. Or, la majorite des modeles relationnels pechent par leur caractere statique qui ne predit pas l’impact potentiel de l’evolution d’un parametre dans la relation. Dans ce sens, les apports des technologies de l’information et de la communication constituent une evolution majeure dans les services bancaires. Ceci nous amene a poser la problematique quant aux effets des TIC sur la qualite de la relation. Sur la base d’une etude empirique conduite dans le domaine des services bancaires professionnels tunisiens, nous montrons que les TIC jouent un role positif dans la perspective de la qualite de la relation. L’appreciation des apports des TIC actuelles a la relation client favorise l’affinement de la conception des futures TIC plus adaptees. L’objectif etant de perenniser les avantages issus des TIC.