Publications | EDHEC Climate Institue

July 2011

A Review of the G20 Meeting on Agriculture: Addressing Price Volatility in the Food Markets

This paper examines food price volatility in the context of the G20 meeting of agriculture ministers. In reviewing the…

July 2011

A Short Note on the Tobin Tax: The Costs and Benefits of a Tax on Financial Transactions

Almost each time volatility in equity, debt, or currency markets increases, there are cries to introduce a tax of…

July 2011

A New Measure of Equity Duration: The Duration-Based Explanation of the Value Premium Revisited

This paper proposes a new methodology to estimate a share's equity duration by using analysts' cash-flow forecasts. It…

July 2011

Skin in the Game versus Skimming the Game: Governance, Share Restrictions and Insider Flows

Hedge-fund managers justify share restrictions as means of protecting the common interest of the shareholders. However,…

July 2011

An Integrated Approach To Sovereign Wealth Risk Management

Sovereign wealth funds (SWFs) typically have no direct earmarked liabilities. Nor should they, as the financial asset…

July 2011

Bond Liquidity Premia

Asset pricing models of limits to arbitrage emphasize the role of funding conditions faced by financial intermediaries.…

July 2011

Force-fitting CDS Spreads to CDS Index Swaps

Issues of contemporaneity, liquidity, different restructuring clauses and market supply and demand, all contribute to…

July 2011

Into a Distant Mirror: the 1870s

On October 16th, 2010, the front page of the Wall Street Journal (WSJ) carried a story entitled, “Flashback to 1870 as…

July 2011

Intelligent Commodity Trading and Risk Management

This paper discusses intelligent risk-management techniques and new product innovation in the commodity futures markets.…

July 2011

Risk Parity - Rewards Risks and Research Opportunities

Mean-Variance optimisation has come under great criticism recently, based on the poor performance experienced by asset…

June 2011

Idiosyncratic Risk and the Pricing of Poorly-Diversified Portfolios

A vast body of literature has documented the value premium and the small firm effect as pervasive stylized facts in…

June 2011

A Review of Corporate Bond Indices: Construction Principles, Return Heterogeneity, and Fluctuations in Risk Exposures

This paper analyses two sets of four corporate investment-grade bond indices each, one for the US market and the other…

June 2011

Measuring High-Frequency Causality between Returns, Realised Volatility and Implied Volatility

We provide evidence on two alternative mechanisms of interaction between returns and volatilities: the leverage effect…

May 2011

Markets With Random Lifetimes and Private Values: Mean-Reversion and Option to Trade

We consider a market in which traders arrive at random times, with random private values for the single traded asset. A…

May 2011

A Variational Approach to Contracting under Imperfect Observations

We consider a continuous time model of the project value process that can only be observed with noise, and we allow for…

April 2011

Direct and Indirect Effects of Index ETFs on Spot-Futures Pricing and Liquidity: Evidence from the CAC 40 Index

This paper investigates how the introduction of an index security directly or indirectly impacts the underlying-index…

April 2011

Correlation vs. Trends: A Common Misinterpretation

Two common beliefs in finance are that (i) a high positive correlation signals assets moving in the same direction while…

April 2011

The European Fund Management Industry Needs a Better Grasp of Non-financial Risks

This publication looks at how non-financial risks and failures have impacted the regulatory agenda in Europe and traces…

March 2011

Idiosyncratic Risk and the Cross-Section of Stock Returns

Idiosyncratic volatility has received considerable attention is the recent financial literature. Whether average…

March 2011

Optimal Design of Corporate Market Debt Programmes in the Presence of Interest-Rate and Inflation Risks

This paper provides a joint quantitative analysis of capital structure decisions and debt structure decisions within a…

March 2011

The Elephant In The Room: Accounting And Sponsor Risks In Corporate Pension Plans

EDHEC surveyed corporate pension funds, their sponsors, and advisers to assess how sponsors manage pension risk and how…

March 2011

Limit Order Markets, High Frequency Traders and Asset Prices

Do high frequency traders affect transaction prices? In this paper we derive the distribution of transaction prices in…

March 2011

Improving Portfolio Selection Using Option-Implied Volatility and Skewness

The objective of this paper is to examine whether one can use option-implied information to improve the selection of…

March 2011

Asset Prices with Heterogeneity in Preferences and Beliefs

This paper studies asset prices in a dynamic, continuous-time, general-equilibrium endowment economy where agents have…

March 2011

The Alpha of a Market Timer

Portfolio managers claim to be able to generate abnormal returns through either superior asset selection or market…

March 2011

A Hedge Fund Investor's Guide to Understanding Managed Futures

Managed futures strategies are a niche-within-a-niche in the capital markets. Despite this status, managed futures have…

March 2011

How to Construct Fundamental Risk Factors?

This paper proposes an alternative way to construct the Fama and French (1993) empirical risk factors. Without losing in…

February 2011

Option Pricing and Hedging in the Presence of Basis Risk

This paper addresses the problem of option hedging and pricing when a futures contract, written either on the underlying…

February 2011

Optimal Contracting with Effort and Misreporting

We propose a new continuous time contracting model, where the project value process can only be observed with noise, and…

February 2011

Asset Allocation with Shadow Assets

The wealth of most investors contains both financial assets as well as non-financial assets. This paper defines shadow…

February 2011

A Post-crisis Perspective on Diversification for Risk Management

Since the global financial crisis of 2008, improving risk management practices—management of extreme risks, in…

February 2011

Assessing Misspecified Asset Pricing Models with Empirical Likelihood Estimators

Hansen and Jagannathan (1997) compare misspecified asset pricing models based on least-square projections on a family of…

January 2011

Case Studies and Risk Management in Commodity Derivatives Trading

Until recently, one could only gain expertise in commodity-derivatives relationships if one had worked in niche…

January 2011

Never the Twain Shall Meet? Addressing the Disconnect between Banks’ Financial and Regulatory Reporting

This paper reviews the arguments for and against the decoupling of capital ratio calculations based on IFRS from those…

January 2011

Giants at the Gate: On the Cross-Section of Private Equity Investment Returns

This paper examines the determinants of private equity returns using a newly constructed worldwide database of 7,500…

January 2011

Introducing a New Form of Volatility Index: The Cross-Sectional Volatility Index

This paper introduces a new form of volatility index, the cross-sectional volatility index. Through formal central limit…

January 2011

Diversification in Funds of Hedge Funds: Is it Possible to Overdiversify?

Samuelson (1967) argues that as a general matter it is easy to show that investors should be maximally diversified. For…

December 2010

Media and Investment Management

This paper measures the differential impact of alternative media outlets. We classify news items about equity hedge…

December 2010

An Integrated Approach To Asset-Liability Management: Capital Structure Choices, Pension Fund Allocation Decisions And The Rational Pricing Of Liability Streams

Correctly assessing the value of a pension plan in deficit with a weak sponsor company is a real challenge given that no…

November 2010

EDHEC-Risk European Private Wealth Management Survey

A survey drawing on responses from 159 European private wealth managers, the three main findings of which are: Private…

November 2010

Does Finance Theory Make the Case for Capitalisation- Weighted Indexing?

Proponents of cap-weighted stock market indices often argue that such indices provide efficient risk/return portfolios.…

October 2010

Asset-Liability Management Decisions For Sovereign Wealth Funds

This paper proposes a quantitative dynamic asset allocation framework for sovereign wealth funds, modelled as large long…

October 2010

Risk Reduction in Style Rotation

This paper investigates the potential improvement in the implementation of style rotation strategies by techniques…

October 2010

A Suggestion for Remedying the Overstated Performance of Non-Investable Hedge Fund Indices

Investable indices tend to recursively underperform their non-investable versions. In light of recent events, we can…

October 2010

Alternative Measurement Bases in Pension Accounting: A Simulation Analysis

This paper explores the financial statement implications of alternative measurement bases underlying defined benefit…

September 2010

From Deterministic To Stochastic Life-Cycle Investing: Implications For The Design Of Improved Forms Of Target Date Funds

In an attempt to address the concern over financially illiterate individuals being increasingly responsible for…

September 2010

Optimal Hedge Fund Allocation with Improved Estimates for Coskewness and Cokurtosis Parameters

Since hedge fund returns are not normally distributed, mean-variance optimisation techniques, which would lead to…

September 2010

New Frontiers In Benchmarking And Liability-Driven Investing

Meeting the challenges of modern investment practice involves the design of novel forms of investment solutions, as…

September 2010

Do Funds of Hedge Funds Really Add Value: A Post-Crisis Analysis

In spite of a somewhat disappointing performance throughout the crisis, and a series of high-profile scandals, investors…

September 2010

The Performance of Socially Responsible Investment and Sustainable Development in France: An Update after the Financial Crisis

In an initial study done in 2008, EDHEC-Risk Institute established that socially responsible (SRI) funds—those funds…