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.

Risk regulations and financial disclosure: an investigation based on corporate communication in french traded companies

Abstract: Purpose of the paper: Risk orientated disclosure is a focal issue of corporate communication. Many provisions have been implemented in the USA and in Europe to promote transparency about risks faced by companies, especially by quoted ones. The increase of mandatory risk reporting applying to companies leads to the question of whether or how companies are compliant with these regulations. The answer itself implies further questions: what is required to be disclosed? And what is risk? The purpose of this paper is to address these issues.Methodology: The paper uses a qualitative methodology based on Huberman and Miles (1994) in order to explore the collected data (annual reports of companies, laws, accounting standards, professional sources).Findings: The paper established an inventory of rules currently existing in order to identify the risk disclosure context faced by French companies and found that there is no consensus between the different pieces of legislation. It is demonstrated that the terminology referred to by companies tends to differ from one to another.Research limitations: The study focused on risk disclosure within annual reports of listed companies and on risk reporting within mandatory provisions. Practical implications: A consensus on the definition of risk needs to be reached in order to assess company management, as well as their compliance with provisions. Originality/value: An attempt is made to set up a framework which could eliminate deficiencies in the lack of consensus in laws and company practice.

Customer engagement through personalization and customization

Abstract: This chapter examines how tailored marketing strategies in the form of customization and personalization can foster customer engagement along the customer lifecycle. Building on various real-world examples, the authors outline the general array of opportunities that companies have at their disposal to customize and/or personalize the marketing mix. In addition, they discuss important contingency factors that facilitate or impede the applicability of both strategies under various business circumstances.

Household Portfolio Underdiversification and Probability Weighting: Evidence from the Field

Abstract: We test whether probability weighting affects household portfolio choice in a representative survey. On average, people display inverse-S-shaped probability weighting, overweighting low probability events. As theory predicts, probability weighting is positively associated with portfolio underdiversification and significant Sharpe ratio losses. Analyzing respondents’ individual stock holdings, we find higher probability weighting is associated with owning lottery-type stocks and positively skewed equity portfolios. People with higher probability weighting are less likely to own mutual funds and more likely to either avoid equities or hold individual stocks. We are the first to empirically link individuals’ elicited probability weighting and real-world decisions under risk.

Towards Smart Equity Factor Indices: Harvesting Risk Premia without Taking Unrewarded Risks

Abstract: This article argues that current smart-beta investment approaches provide only a partial answer to the main shortcomings of capitalization-weighted indices and develops a new approach to equity investing, which the authors refer to as smart-factor investing. The authors then provide an assessment of the benefits of simultaneously addressing the two main problems of cap-weighted indices—their undesirable factor exposures and their heavy concentration—by constructing factor indices that explicitly seek exposures to rewarded risk factors, while diversifying away unrewarded risks. The results suggest that such smart-factor indices lead to considerable improvements in risk-adjusted performance. For long-term U.S. data, smart-factor indices for a range of different factor tilts consistently outperform cap-weighted, factor-tilted indices. Compared with the broad cap-weighted index, smart-factor indices roughly double the risk-adjusted return (Sharpe ratio). Outperformance of such indices persists at levels ranging from 2.92% to 4.46% annually, even when assuming unrealistically high transaction costs. Moreover, by providing explicit tilts to consensual factors, such indices improve upon many current smart-beta offerings where, more often than not, factor tilts exist as unintended consequences of ad hoc methodologies.