The Elusive “Stock-Picker’s Market”: Dispersion and Mutual Fund Performance
By Jacob Epstein This paper explores the relationship between active mutual fund performance and market dispersion from January 1990 to December 2018. I find a significant positive relationship between dispersion and 4-factor alpha overall, providing some evidence of managerial skill. There are large differences in this relationship by decade and fund selectivity. The results suggest […]
An Unequal Dream: The Mortgage Rate Premium Paid by Black Communities
By Michael Nicholson This paper analyzes loan pricing discrimination against predominantly black communities in U.S. mortgage markets. Building on previous literature, this paper posits that ceteris paribus predominantly black communities continue to face economically significant discrimination in mortgage pricing. Ultimately, this paper concludes that predominantly black communities face 10-14 basis points of pricing discrimination […]
Overreaction in the Financial Times Stock Exchange (FTSE)
By Yusuke Ewan Tanaka Legard The Overreaction Hypothesis suggests that investors overreact to unexpected news in the financial world, which leads to a mispricing of equities. This paper investigates the presence of overreaction in the Financial Times Stock Exchange (FTSE) between 1995 and 2018. The empirical methodology studies the monthly returns of equities in the […]
Determinants of NFL Spread Pricing: Incorporation of Google Search Data Over the Course of the Gambling Week
By Shiv S. Gidumal and Roland D. Muench We investigate the factors that Las Vegas incorporates into opening spreads for NFL matchups. We include a novel proxy measure for gambler sentiment constructed with Google search data. We then investigate whether changes in this proxy are reflected in the closing spreads for NFL matchups and find […]
Volatility and Correlation Modeling for Sector Allocation in International Equity Markets
By Melanie Fan and Kate Yuan Reliable estimates of volatility and correlation are crucial in asset allocation and risk management. This paper investigates Static, RiskMetrics, and Dynamic Conditional Correlation (DCC) models for estimating volatility and correlation by testing them in an asset allocation context. Optimal allocation weights for one year found using estimates from each […]
Crisis Period Forecast Evaluation of the DCC-GARCH Model
By Yang Ding The goal of this paper is to investigate the forecasting ability of the Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroskedasticity (DCC-GARCH). We estimate the DCC’s forecasting ability relative to unconditional volatility in three equity-based crashes: the S&L Crisis, the Dot-Com Boom/Crash, and the recent Credit Crisis. The assets we use are the […]
Rebalancing, Conditional Value at Risk, and t-Copula in Asset Allocation
By Irving Wang Traditional asset allocation methods for modeling the trade between risk and return do not fully reflect empirical distributions. Thus, recent research has moved away from assumptions of normality to account for risk by looking at fat tails and asymmetric distributions. Other studies have also considered multiple period frameworks to include asset rebalancing. […]
Contagion in Risk Markets
by Matthew Moore and James Schulhof Abstract During periods of market dislocation, which can be characterized by high asset volatility, correlations between assets generally tend to increase. However, there has been little research on the behavior of correlations between risk measures across securities markets. The aim of our research is to examine correlation dynamics between […]
Leveraging the American Dream: Explaining the Shift Towards Mortgage Debt since the 1970’s
by James Robert Melnick and James Colin Montupet Abstract We show that the determinants of mortgage borrowing and other forms of consumer credit differ: borrowers tend to consider asset holdings when taking out a mortgage, but focus on short-term economic expectations when borrowing other consumer credit. We hypothesize that this “mortgage wealth effect” occurs in […]
Does Risk Pay? An Analysis of Short Gamma Trading Strategies and Volatility Forecasting in the Swaptions Market
by Tasha Staer Bollerslev and Michael Scott Kuritzky Abstract We evaluate short gamma trading strategies in the interest rate swaptions market from January 4th, 1999 to January 19th, 2007, and test the effectiveness of swaption proprietary forecasted volatility at predicting future realized volatility. We find that swaptions market proprietary forecasted volatility is an effective estimator; […]
